Andrew Bongjune Choi

Abstract: How should an employer design its retention and promotion policy when there is competition for its employees? In an environment where the incumbent employer learns more about its workers than other potential employers, we show that the incumbent’s optimal policy always over-retains workers—retaining workers that it would have let go if all employers had learnt about workers symmetrically—to dampen the positive signalling effect of retention. In contrast, the optimal policy may over- or under-promote workers. The incumbent’s incentive to distort its policy is driven by the technologies of competing firms in the labour market. We demonstrate the extent to which the firm can implement the optimal policy without the ability to commit and study the incentive for the firm to manipulate the signalling effect via designing jobs. Our results shed light on the role of (possibly vacuous) job titles and provide a novel rationale for the Peter Principle.

Abstract:  This paper studies a novel tension between a principal who wishes to make an informed decision and an agent who wants to know what the principal will do. The principal wishes to promote the agent only if the state is good, and gradually receives private information about the state. The agent wants promotion but would rather leave than stay and fail promotion. To induce the agent to stay, the principal commits to commit; that is, she commits today to tell the agent tomorrow about his chances of promotion the day after. Because the principal cannot contract on her information, she may ignore it. We provide conditions under which the principal does not lead the agent on. Our results apply to worker retention, relationship-specific investment, and forward guidance.

Abstract:  We introduce search friction into the two-sided matching model with transfers by requiring that a worker-firm pair can match only if they are acquainted. Each worker may conduct a costly search to acquaint himself with new firms. A matching is stable if there are no blocking pairs among acquainted agents and no worker wishes to conduct a search. A matching is efficient if it maximizes total surplus given the acquaintance of agents, and no searching can increase total surplus net of search cost in expectation. All stable matchings are efficient, but not all efficient assignments can be made stable.

Presentations: Econometric Society Meeting (WUSTL, CUHK)