Market Power Effects on Worker-Employer Network Formation in Evolutionary Labor Markets with Adaptive Search

This study reports on market power experiments for an agent-based computational model of a labor market. Workers and employers repeatedly choose and refuse worksite partners on the basis of continually updated expected returns, engage in worksite interactions modelled as two-person games, and evolve their worksite strategies over time. Three treatment factors affecting the relative market power of workers and employers are experimentally varied: market structure (two-sided, partially fluid, and endogenous type markets); market concentration (ratio of workers to employers); and market capacity (ratio of potential work offers to potential job openings). Particular attention is focused on experimentally determined correlations between market power and the formation of contractual networks among workers and employers, and between contractual network formation and the types of worksite interactions and welfare outcomes that these contractual networks support.