Real-Time Search in the Laboratory and the Market
Year: 2011
Type: article
Abstract: While widely accepted labor market search models imply a constant reservation wage policy, empirical evidence strongly suggests that reservation wages decline in search duration. This paper reports the results of the first real-time-search laboratory experiment. The controlled environment subjects face is stationary, and the payoff-maximizing reservation wage is constant. Nevertheless, subjects' reservation wages decline sharply over time. We investigate two hypotheses to explain this decline: 1. Searchers respond to the stock of accruing search costs. 2. Searchers experience non-stationary subjective costs of time spent searching. Our data support the latter hypothesis, and we substantiate this conclusion both experimentally and econometrically. (JEL C91, D83, J64)
Source: American Economic Review
Institutions: Federal Reserve Bank of New York, New York University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2173551358