Directing Search with Cheap Talk: Theory and Evidence

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IZA Seminar

Place: Zoom Seminar

Date: 27.10.2020, 15:00 - 16:15


Presentation by 

Philipp Kircher (Cornell University)

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Meeting ID: 874 8721 3161



We develop a theory of cheap talk in matching markets in which employers can announce their preferences, which workers can use to direct their search. In a large online labor market, employers were given the opportunity to state their relative willingness to pay for productivity. Preferences were elicited for all firms, but preferences were only revealed to job-seekers for treated firms. Job-seekers clearly targeted their applications to employers of the right “type” even when they could not observe preferences. However, revelation of preferences caused substantial additional sorting. This additional sorting strongly affected who was matched to whom, and at what price, implying seekers regarded revealed information as credible ex ante commitments. Overall, the treatment raised the average wage bill and the number of hours worked and likely increased match quality.

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