An Agent-Based Simulation of the Swiss Labour Market : An Alternative for Policy
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McCall ( 1970 ) discusses the meaning of this “ critical number ” and proves : “ The cost , c , is incurred simultaneously with the offer , x . If the process terminates , i . e ., employment commences after N job offers , then the return , f , is simply the value of the N th offer , say x N , less the cost of search , c , times the number of job offers : f = x N
−c N
. If an x is observed at the first period and the process continues in optimal fashion thereafter , the return is given by f ( x ) = −c + max [ x , E ( f ( x ))]. If we let ε = E ( f ( x )), it is clear from this equation that the optimal policy has the following form : continue searching if x < ε accept employment if x ≥ ε
Where : c = cost per period of search , x = a random variable denoting the job offer Φ ( x ) = the probability density function of x f ( x ) = maximum return obtainable when a job offer x has just been observed .
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A complete dissertation on this topic can be found in Terna ( 2013 ).
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