American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Real-Time Search in the Laboratory and the Market
American Economic Review
vol. 101,
no. 2, April 2011
(pp. 948–74)
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)Citation
Brown, Meta, Christopher J. Flinn, and Andrew Schotter. 2011. "Real-Time Search in the Laboratory and the Market." American Economic Review, 101 (2): 948–74. DOI: 10.1257/aer.101.2.948Additional Materials
JEL Classification
- C91 Design of Experiments: Laboratory, Individual
- D83 Search; Learning; Information and Knowledge; Communication; Belief
- J64 Unemployment: Models, Duration, Incidence, and Job Search