Simultaneous Search and Network Efficiency

When workers send applications to vacancies they create a network. Frictions arise becauseworkers typically do not know where other workers apply to and firms do not know whichcandidates other firms consider. The first coordination friction affects network formation, whilethe second coordination friction affects network clearing. We show that those frictions and thewage mechanism are in general not independent. The wage mechanism determines both thedistribution of networks that can arise and the number of matches on a given network.Equilibria that exhibit wage dispersion are inefficient in terms of network formation. Undercomplete recall (firms can go back and forth between all their candidates) only wagemechanisms that allow for ex post Bertrand competition generate the maximum matching ona realized network.:::