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Labour market screening with intermediaries

Sonderforschungsbereich/Transregio 15 Governance and the Efficiency of Economic Systems München
Publication Date
  • C78
  • D44
  • E24
  • J41
  • Ddc:330
  • Matching
  • Multi-Item Auctions
  • Sequential Auctions
  • Screening
  • Economics


We consider a Rothschild-Stiglitz-Spence labour market screening model and employ a centralised mechanism to coordinate the efficient matching of workers to firms. This mechanism can be thought of as operated by a recruitment agency, an employment office or head hunter. In a centralised descending-bid, multi-item procurement auction, workers submitwage-bids for each job and are assigned stable jobs as equilibrium outcome. We compare this outcome to independent, sequential hiring by firms and conclude that, in general, a stable assignment can only be implemented if firms coordinate to some extent.

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