The probability of finding a job in the two-sided search model is
A)increasing in market tightness.
B)decreasing in the efficiency of the matching function.
C)increasing in the ratio of consumers searching to firms.
D)constant across all levels of market tightness.
E)decreasing in market tightness.

Question

Quizplus · Accepted Answer

In the two-sided search model, the probability of finding a job is increasing in market tightness. This is because as the number of vacancies increases relative to the number of job seekers, the competition among firms to fill their positions increases, which in turn increases the probability of job seekers finding a job. As market tightness decreases (i.e., there are fewer vacancies relative to job seekers), the competition among job seekers for a limited number of jobs increases, resulting in a lower probability of finding a job.

The Probability of Finding a Job in the Two-Sided Search