STRUCTURE, BEHAVIOR, AND MARKET POWER IN AN EVOLUTIONARY LABOR MARKET WITH ADAPTIVE SEARCH

This study uses an agent-based computational labor market framework to undertake a systematic experimental investigation of the relationship between job capacity, job concentration, and market power. Job capacity is measured by the ratio of total potential job openings to total potential work offers, and job concentration is measured by the ratio of work suppliers to employers. For each setting of the capacity and concentration treatment factors, 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. Controlling for job capacity, job concentration has only small unsystematic effects on attained market power levels.