A birandom job search problem with risk tolerance. (English) Zbl 1264.91081

Wang, Guoli; Tang, Wansheng; Zhao, Ruiqing

J. Appl. Math. 2012, Article ID 161573, 12 p. (2012).

Summary: This paper considers a novel class of birandom job search problem, in which the job offers are sampled by the job searcher from a finite job set with equivalent probability and their wages are characterized as independent but maybe not identically nonnegative random variables. The job searcher knows the job offer’s wage distribution when he samples the job offer. Since the offered wage is a random variable and the reservation wage is a deterministic number, it is meaningless to make comparison directly. In order to rank the random wage and the reservation wage and provide decision support, a risk tolerance criterion is designed, and the job searcher then accepts or rejects the sampled job offer depending on whether the risk tolerance criterion is met or not. Since the offered wages are random variables and the search process is random, it’s impossible to obtain the job searcher’s real return; in this case, its expected value can be calculated via birandom theory. Simultaneously, some propositions on the expected return as well as the average search times are also studied which may provide some valuable suggestions to the job searcher. Numerical examples are given to illustrate the decision process of the risk tolerance-based birandom job search problem.

MSC:

91B40

Labor market, contracts (MSC2010)

References:

[1]	G. Stigler, “The economics of information,” Journal of Political Economy, vol. 69, no. 3, pp. 213-225, 1961.
[2]	G. Stigler, “Information in the labor market,” Journal of Political Economy, vol. 70, no. 5, pp. 94-104, 1962.
[3]	J.J. McCall, “Economics of information and job search,” Quarterly Journal of Economics, vol. 84, no. 1, pp. 113-128, 1970.
[4]	B. Jovanovic, “Job-matching and the theory of turnover,” Journal of Political Economy, vol. 87, no. 5, pp. 972-990, 1979.
[5]	R. Shimer, “On-the-job search and strategic bargaining,” European Economic Review, vol. 50, no. 4, pp. 811-830, 2006.
[6]	M. Hagedorn, A. Kaul, and T. Mennel, “An adverse selection model of optimal unemployment insurance,” Journal of Economic Dynamics and Control, vol. 34, no. 3, pp. 490-502, 2010. · Zbl 1230.91097
[7]	C. A. Pissarides, “Equilibrium in the labor market with search frictions,” American Economic Review, vol. 101, no. 4, pp. 1092-1105, 2011.
[8]	D. M. Ramsey, “A large population job search game with discrete time,” European Journal of Operational Research, vol. 188, no. 2, pp. 586-602, 2008. · Zbl 1151.91020
[9]	S. Brown, J. Roberts, and K. Taylor, “Reservation wages, labour market participation and health,” Journal of the Royal Statistical Society Series A, vol. 173, no. 3, pp. 501-529, 2010. · Zbl 05729455
[10]	G. Menzio and S. Shi, “Efficient search on the job and the business cycle,” Journal of Political Economy, vol. 119, no. 3, pp. 468-510, 2011.
[11]	D. T. Mortensen and R. Wright, “Competitive pricing and efficiency in search equilibrium,” International Economic Review, vol. 43, no. 1, pp. 1-20, 2002.
[12]	J. Peng and B. Liu, “Birandom variables and birandom programming,” Computers and Industrial Engineering, vol. 53, no. 3, pp. 433-453, 2007.