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Job search: the continuous case

Published online by Cambridge University Press:  14 July 2016

Dror Zuckerman
Dror Zuckerman*
Affiliation:
The Hebrew University of Jerusalem
*
∗ Postal address: School of Business Administration. The Hebrew University of Jerusalem, Jerusalem, Israel.
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Abstract

In this paper we examine a continuous model of job search. An individual is seeking employment continuously over time. There is a search cost of c monetary units per unit time. Job offers are received randomly over time according to a renewal process. The wage offers are assumed to be positive, independent and identically distributed random variables. The only decision the searcher must make is when to stop searching and accept an offer. The objective is to determine a stopping rule that is optimal under the following optimality criteria:

  1. (a) maximum expected net return,

  2. (b) maximum expected discounted net return.

We investigate the case in which the stream of job offers is determined by a Poisson process. We show that under the two optimality criteria defined above an optimal stopping rule is determined by a single critical value ξ. The optimal strategy is to accept the first job offer that exceeds ξ. In the second part of the article, the search model in which offers are received according to a general renewal process is examined.

Keywords

JOB SEARCHPOISSON PROCESSRENEWAL PROCESSSTOPPING TIME
Type
Research Papers
Information
Journal of Applied Probability , Volume 20 , Issue 3 , September 1983 , pp. 637 - 648
Copyright
Copyright © Applied Probability Trust 1983 

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References

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