Structure, Behavior, and Market Power in an Evolutionary Labor Market with Adaptive Search

Abstract

This study uses an agent-based computational labor market framework to experimentally study the relationship between job capacity, job concentration, and market power. Job capacity is measured by the ratio of potential job openings to potential work orders, and job concentration is measured by the ratio of work suppliers to employers. For each experimental treatment, work suppliers and employers repeatedly seek preferred worksite partners based on continually updated expected utility, engage in efficiency-wage worksite interactions modelled as prisoner's dilemma games, and evolve their worksite behaviors over time. The main finding is that job capacity consistently trumps job concentration when it comes to predicting the relative ability of work suppliers and employers to exercise market power. Related work can be accessed here: http://www.econ.iastate.edu/tesfatsi/tnghome.htmmarket power; agent-based computational economics; evolutionary game; Labor market dynamics; job capacity; job concentration; adaptive search; networks; endogenous interactions