Search Theory
Updated 2026-07-31
INTRODUCTION
English translation pending.
CORE DEFINITION
A body of theory describing how economic agents behave when information is incomplete and acquiring it is costly. Applied to labor markets, it treats workers and firms as engaged in a matching process that consumes time and resources, so some unemployment persists even when vacancies exist. The central construct is the reservation value, the minimum acceptable offer, which a searcher sets by weighing the marginal cost of continuing against the expected gain from a better match. The framework was formalized in the 1960s and 1970s by George Stigler, John McCall, and Dale Mortensen, among others.
SCAFFOLDING EFFECT
Reduce cognitive load
- Job Search Design: set a reservation value before searching so decisions are not made ad hoc under pressure. - Friction Diagnosis: check whether unemployment reflects missing jobs or slow matching before prescribing policy. - Cost Reduction: lower search cost through information and referrals rather than adding pressure to accept.
Anchor fast decisions
Search is sequential and each sample costs time, effort, and foregone income. Because the distribution of offers is unknown, the searcher compares the value of accepting now against the option value of one more draw, which yields an optimal stopping rule: accept anything above the reservation value and continue below it. Firms screening candidates follow the same logic. Because both sides search, some matches that would have been mutually beneficial never form, and the resulting gap is frictional unemployment rather than a shortage of positions.
MINIMUM ACTION
In progress 0/1Practice this model in one real situation:
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Source support: Explicit
- en.wikipedia.orghttps://en.wikipedia.org/wiki/Search_theoryverified
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