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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

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Competition in a Posted-Salary Matching Market under Private Information

Luke A. Boosey
  • Corresponding author
  • Division of the Humanities and Social Sciences, California Institute of Technology, 1200 E. California Blvd. MC 228–77, Pasadena CA, 91125, USA
  • Current address: Department of Economics, Florida State University, 288 Bellamy Building, Tallahassee FL, 32306–2180, USA
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Published Online: 2016-03-24 | DOI: https://doi.org/10.1515/bejte-2015-0022


We study a posted-salary labor market in which firms engage in salary competition. Firms’ preferences over workers are private information, creating uncertainty about competitive pressure for different workers. We consider a baseline 2-firm, 2-worker model, then extend the analysis to larger markets by replicating the baseline. We characterize the unique Bayesian- Nash equilibrium, in which each firm type chooses a distributional strategy with interval support in the salary space. The main result shows that competition is localized, in the sense that firm types with a common most preferred worker choose non-overlapping, adjacent supports. We also provide numerical results to show that the equilibrium strategies in finite replicated markets converge to the corresponding equilibrium strategies in a market with a continuum of firms and workers.

Keywords: salary competition; posted salary; two-sided markets; Bayesian games; replicated markets

JEL: C72; C78; D82; J41


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About the article

Published Online: 2016-03-24

Published in Print: 2016-06-01

Citation Information: The B.E. Journal of Theoretical Economics, Volume 16, Issue 2, Pages 599–631, ISSN (Online) 1935-1704, ISSN (Print) 2194-6124, DOI: https://doi.org/10.1515/bejte-2015-0022.

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