This paper analyses whether competing firms should open their career systems from an incentive perspective. Applicants for a vacant position compete in a Tullock contest. If career systems are open, workers within a firm may compete harder, thereby exerting higher efforts. However, under simultaneous vacancies at different firms, competition over a specific job may become softer for applicants and lead to a reduction in applicants’ efforts. We analyze incentives when firms compete over workers, yet serve separate product markets, as well as when firms compete in the same product market. We find that firms will typically open their career systems, though risks of ending up in situations of low competitive pressure among applicants are pronounced in both market structures. When firms serve the same product market, softening competition among workers may even be used as a strategic tool for weakening a rival.
Opening Career Systems: The Case of Simultaneous Vacancies
Matthias Kräkel, Nora Szech und Frauke von Bieberstein