Strategic Bidding with Quotas

Abstract

This paper analyzes the effects of market power on the performance of matching markets with slot-specific transfers. I find that strategic wage posting in such markets does, in general, not result in assortative matching since firms with higher quotas—and thus relatively more market power—pay on average lower wages than their competitors due to a lack of within-firm rivalry. If highly productive firms command market power, the resulting welfare loss may be substantial. Moreover, firms typically do not gain from wage discrimination. Thus, strategic wage posting is compatible with the absence of entry-level wage variation within firms.