Bidding for teams

Abstract

We develop a simple competing job auction model to study wages and employment within teams. If synergies favor larger teams, the basic competing job auction model predicts that workers are generally paid a wage less than their marginal product of labor and that there is too much entry of firms. We then extend the model to allow for workplace competition. In this case, the firms can also compete by a commitment to job amenities and a minimum scale of operation. We then find that wages are always equal to the marginal product of labor and entry of firms is efficient.