Ronald Wolthoff
Professor, Department of Economics, University of Toronto
I am an economist who studies how markets with search and information frictions allocate resources. I am especially interested in how the ways the two sides of a market meet, compete, and determine prices shape efficiency, sorting, and inequality. My work combines theoretical and empirical methods, with labor markets as its primary application.
I am currently a Professor in the Department of Economics at the University of Toronto, where I serve as Chair of Economics at the Mississauga campus.
Research
Work in Progress
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Platform-Controlled Search and Distortions in Attention Allocation
Digital platforms allocate buyer attention across sellers that differ in quality and breadth of appeal. We study a monopoly platform that sets meeting rates between buyers and two seller types — niche sellers whose high-quality good is valued by a fraction x of buyers and mass-market sellers whose good is valued by all. Sellers compete by posting prices à la Burdett and Judd (1983), so buyer surplus requires competition, while platform revenue requires seller rents. This difference creates a systematic distortion: as search capacity grows, the platform keeps high-quality niche attention just past the point where extra exposure stops creating rents and starts eroding them — its saturation point — and diverts the rest to mass-market sellers. The resulting buyer-surplus loss converges to a finite limit proportional to the quality gap between the two goods, split equally between an allocative loss from too little high-quality exposure and excess rent extracted by sellers. Applying the model to Amazon product search and Google passage-ranking data indicates that, for captive buyers, both platforms operate past the saturation point, with buyer-surplus losses of 63 and 44 percent of the planner's benchmark, respectively. Allowing buyer participation to respond to the platform's recommendation strategy disciplines the platform and shrinks this loss.
@unpublished{Cai2026Platform, author = {Cai, Xiaoming and Gautier, Pieter A. and Wolthoff, Ronald}, title = {{Platform-Controlled Search and Distortions in Attention Allocation}}, year = {2026}, note = {Working paper} } - Signals, Interviews, and Hiring: Statistical Discrimination in Labor Market Equilibrium
Publications
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Simultaneous Search and Adverse Selection
We study the effect of diminishing search frictions in markets with adverse selection by presenting a model in which agents with private information can simultaneously contact multiple trading partners. We highlight a new trade-off: facilitating contacts reduces coordination frictions but also the ability to screen agents' types. We find that, when agents can contact sufficiently many trading partners, fully separating equilibria obtain only if adverse selection is sufficiently severe. When this condition fails, equilibria feature partial pooling and multiple equilibria co-exist. We show that facilitating contacts can lead to a reduction in welfare. In the limit, as the number of contacts becomes large, some of the equilibria converge to the competitive outcomes of Akerlof (1970), including Pareto-dominated ones; other pooling equilibria continue to feature frictional trade in the limit, where entry is inefficiently high. Our findings provide a basis to assess the effects of recent technological innovations that have made meetings easier.
@article{Auster2025Simultaneous, author = {Auster, Sarah and Gottardi, Piero and Wolthoff, Ronald}, title = {{Simultaneous Search and Adverse Selection}}, journal = {The Review of Economic Studies}, year = {2025}, volume = {92}, number = {6}, pages = {3541–3573}, doi = {10.1093/restud/rdaf014} } -
Wage Setting Protocols and Labor Market Conditions: Theory and Evidence
We theoretically and empirically examine how firms' choices of wage-setting protocols respond to labor market conditions. We develop a simple model in which workers can send multiple job applications and firms choose between posting wages and Nash bargaining. Posting a wage allows the firm to commit to lower wages than would be negotiated ex-post, but eliminates the ability to respond to a competing offer, should the worker have one. The model makes predictions about the joint correlation between the application-vacancy ratio, the number of applications per worker, and the incidence of wage posting. We find empirical support for these predictions in a novel dataset from an online job board. Our theory also implies that an increase in labor market competition may manifest itself through the incidence of wage posting rather than a change in the posted wages themselves; and that labor market regulations such as pay transparency laws have redistributive equilibrium effects by disproportionately benefiting workers with few applications.
@article{Rabinovich2025Wage, author = {Rabinovich, Stanislav and Samaniego de la Parra, Brenda and Wolthoff, Ronald}, title = {{Wage Setting Protocols and Labor Market Conditions: Theory and Evidence}}, journal = {Labour Economics}, year = {2025}, volume = {97}, pages = {102806}, doi = {10.1016/j.labeco.2025.102806} } -
Search, Screening and Sorting
We examine how search frictions impact labor market sorting by constructing a model consistent with recent evidence that employers collect a pool of applicants before interviewing a subset. We derive the necessary and sufficient conditions for sorting in both applications and matches. Positive sorting is obtained when production complementarities outweigh a force against sorting measured by a (novel) quality-quantity elasticity. Interestingly, the production complementarities needed for positive sorting depend on the population fraction of high-type workers and can be increasing in the number of interviews. Our model shows how policies like Ban the Box can backfire because when attractive firms can no longer perfectly screen certain workers, they may discourage them from applying.
@article{Cai2025Search, author = {Cai, Xiaoming and Gautier, Pieter A. and Wolthoff, Ronald}, title = {{Search, Screening and Sorting}}, journal = {American Economic Journal: Macroeconomics}, year = {2025}, volume = {17}, number = {3}, pages = {205–236}, doi = {10.1257/mac.20240026} } -
Spatial Search
This paper considers a random search model where some locations provide sellers with better chances of meeting many buyers than other locations (for example popular shopping streets or the first page of a search engine). When sellers are heterogeneous in terms of the quality of their product and/or the probability that a given buyer likes their product, it is desirable that sellers of high-quality niche products sort into the best locations (positive assortative matching, PAM). We show that this does not always happen in a decentralized market. Finally, we endogenize the location distribution and show that PAM between sellers and locations always arises in equilibrium. However, the equilibrium distribution of locations is too favorable for the sellers of high-quality, niche products.
@article{Cai2025Spatial, author = {Cai, Xiaoming and Gautier, Pieter A. and Wolthoff, Ronald}, title = {{Spatial Search}}, journal = {Journal of Economic Theory}, year = {2025}, volume = {224}, pages = {105976}, doi = {10.1016/j.jet.2025.105976} } -
Meetings and Mechanisms
This paper shows how meeting frictions affect equilibrium trading mechanisms and allocations in an environment where identical sellers post mechanisms to compete for buyers with ex-ante heterogeneous private valuations. Multiple submarkets can emerge, each consisting of all sellers posting a particular mechanism and the buyers who visit those sellers. Under mild conditions, high-valuation buyers are all located in the same submarket, and low valuation buyers can be in: (i) the same submarket, (ii) a different submarket and (iii) a mixture of (i) and (ii). The decentralized equilibrium is efficient when sellers can post auctions with reserve prices or entry fees.
@article{Cai2023Meetings, author = {Cai, Xiaoming and Gautier, Pieter A. and Wolthoff, Ronald}, title = {{Meetings and Mechanisms}}, journal = {International Economic Review}, year = {2023}, volume = {64}, number = {1}, pages = {155–185}, doi = {10.1111/iere.12592} } -
Misallocation Inefficiency in Partially Directed Search
We identify a misallocation inefficiency in search models, which is distinct from the aggregate entry distortion emphasized in the previous literature, and arises instead from partially directed search. We consider a framework in which workers differ in whether they can direct their search, and firms are heterogeneous in productivity. The main result is that too many workers apply to high-productivity firms, relative to the social optimum. This occurs because too many firms attract only random searchers, in order to extract more surplus from them. Because it is the low-productivity firms that do so, this induces all the directed searchers to concentrate at the high-productivity firms. A minimum wage can increase employment and welfare by reallocating workers across firms. With endogenous entry by either workers or firms, the misallocation inefficiency coexists with a standard entry externality; in this case, a proper combination of a tax or subsidy and a minimum wage can restore the efficient allocation.
@article{Rabinovich2022Misallocation, author = {Rabinovich, Stanislav and Wolthoff, Ronald}, title = {{Misallocation Inefficiency in Partially Directed Search}}, journal = {Journal of Economic Theory}, year = {2022}, volume = {206}, pages = {105559}, doi = {10.1016/j.jet.2022.105559} } -
Opening the Black Box of the Matching Function: The Power of Words
On the leading job board CareerBuilder.com, high-wage job postings unexpectedly attract fewer applicants, and this is the case even within a detailed occupation. Viewed through the lens of our directed search model, this negative relationship is indicative of substantial applicant heterogeneity within an occupation. Empirically, we find that job title heterogeneity is key: within a job title, jobs with 10% higher wages do attract 7.7% more applicants. Furthermore, our findings are consistent with a higher return to worker quality for hires in "manager" and "senior" job titles. Overall, our findings demonstrate the power of words in the matching process.
@article{Marinescu2020Opening, author = {Marinescu, Ioana and Wolthoff, Ronald}, title = {{Opening the Black Box of the Matching Function: The Power of Words}}, journal = {Journal of Labor Economics}, year = {2020}, volume = {38}, number = {2}, pages = {535–568}, doi = {10.1086/705903} } -
Applications and Interviews: Firms' Recruiting Decisions in a Frictional Labor Market
I develop a directed search model to study the recruitment decisions of firms competing for workers who ex post differ in two dimensions: i) their match productivity, and ii) their probability of accepting a job offer, endogenously determined by their choice of application portfolio. To attract these workers, firms post a recruiting intensity and a hiring standard, in addition to terms of trade. A higher recruiting intensity is costly, but allows the firm to select more applicants for an interview, which reveals their productivity. The hiring standard solves the tradeoff between immediate hiring and waiting for a potentially better match in the future. I characterize equilibrium and find that various outcomes, including uniqueness of equilibrium and the cyclicality of recruiting intensity, crucially depend on firms' recruiting cost and workers' search cost. Calibration of the model to the US labor market indicates a continuum of equilibria. Given selection of a particular equilibrium, hiring standards are countercyclical while recruiting intensity is procyclical. The calibrated model creates more amplification than a standard model without intensive margins and gives rise to procyclical match efficiency when viewed through the lens of a Cobb-Douglas matching function.
@article{Wolthoff2018Applications, author = {Wolthoff, Ronald}, title = {{Applications and Interviews: Firms' Recruiting Decisions in a Frictional Labor Market}}, journal = {The Review of Economic Studies}, year = {2018}, volume = {85}, number = {2}, pages = {1314–1351}, doi = {10.1093/restud/rdx045} } -
Competing with Asking Prices
In many markets, sellers advertise their good with an asking price. This is a price at which the seller will take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the seller receives no better offers. We construct an environment with a few simple, realistic ingredients and demonstrate that, by using an asking price, sellers both maximize their revenue and implement the efficient outcome in equilibrium. We provide a complete characterization of this equilibrium and use it to explore the implications of this pricing mechanism for transaction prices and allocations.
@article{Lester2017Competing, author = {Lester, Benjamin and Visschers, Ludo and Wolthoff, Ronald}, title = {{Competing with Asking Prices}}, journal = {Theoretical Economics}, year = {2017}, volume = {12}, number = {2}, pages = {731–770}, doi = {10.3982/TE1846} } -
Search Frictions, Competing Mechanisms and Optimal Market Segmentation
In a market in which sellers compete for heterogeneous buyers by posting mechanisms, we analyze how the properties of the meeting technology affect the allocation of buyers to sellers. We show that a separate submarket for each type of buyer is the efficient outcome if and only if meetings are bilateral. In contrast, a single market with all agents is optimal if and only if the meeting technology satisfies a novel condition, which we call "joint concavity." Both outcomes can be decentralized by sellers posting auctions combined with a fee that is paid by (or to) all buyers with whom the seller meets. Finally, we compare joint concavity to two other properties of meeting technologies, invariance and non-rivalry, and explain the differences.
@article{Cai2017Search, author = {Cai, Xiaoming and Gautier, Pieter A. and Wolthoff, Ronald}, title = {{Search Frictions, Competing Mechanisms and Optimal Market Segmentation}}, journal = {Journal of Economic Theory}, year = {2017}, volume = {169}, pages = {453–473}, doi = {10.1016/j.jet.2017.03.002} } -
Search Costs and Efficiency: Do Unemployed Workers Search Enough?
Many labor market policies affect the marginal benefits and costs of job search. The impact and desirability of such policies depend on the distribution of search costs. In this paper, we provide an equilibrium framework for identifying the distribution of search costs and we apply it to the Dutch labor market. In our model, the wage distribution, job search intensities, and firm entry are simultaneously determined in market equilibrium. Given the distribution of search intensities (which we directly observe), we calibrate the search cost distribution and the flow value of non-market time; these values are then used to derive the socially optimal firm entry rates and distribution of job search intensities. From a social point of view, some unemployed workers search too little due to a hold-up problem, while other unemployed workers search too much due to coordination frictions and rent-seeking behavior. Our results indicate that jointly increasing unemployment benefits and the sanctions for unemployed workers who do not search at all can be welfare-improving.
@article{Gautier2016Search, author = {Gautier, Pieter A. and Moraga-González, José L. and Wolthoff, Ronald}, title = {{Search Costs and Efficiency: Do Unemployed Workers Search Enough?}}, journal = {European Economic Review}, year = {2016}, volume = {84}, pages = {123–139}, doi = {10.1016/j.euroecorev.2015.04.001} } -
Becker Meets Ricardo: Multisector Matching with Communication and Cognitive Skills
This paper presents a tractable framework for studying frictionless matching in education and labor markets when individuals have heterogeneous communication and cognitive skills. In the model, there are gains to specialization and team production, but specialization requires communication and coordination between team members. Individuals accumulate cognitive skills in schools when young. As adults, they decide whether to work as a manager or a worker in a firm or become a teacher in a school. Individuals with more communication skills will become either managers or teachers and earn higher wages. Each manager manages several workers and each teacher teaches several students, with their span of control being determined by their communication skill. These individuals also invest discretely more in education than marginally different individuals who become workers. Equilibrium is equivalent to the solution of an utilitarian social planner solving a linear programming problem.
@article{McCann2015Becker, author = {McCann, Robert J. and Shi, Xianwen and Siow, Aloysius and Wolthoff, Ronald}, title = {{Becker Meets Ricardo: Multisector Matching with Communication and Cognitive Skills}}, journal = {Journal of Law, Economics, and Organization}, year = {2015}, volume = {31}, number = {4}, pages = {690–720}, doi = {10.1093/jleo/ewv002} } -
Academic Wages and Pyramid Schemes: A Mathematical Model
This paper analyzes a steady state matching model interrelating the education and labor sectors. In this model, a heterogeneous population of students match with teachers to enhance their cognitive skills. As adults, they then choose to become workers, managers, or teachers, who match in the labor or educational market to earn wages by producing output. We study the competitive equilibrium which results from the steady state requirement that the educational process replicate the same endogenous distribution of cognitive skills among adults.
@article{Erlinger2015Academic, author = {Erlinger, Alice and McCann, Robert J. and Shi, Xianwen and Siow, Aloysius and Wolthoff, Ronald}, title = {{Academic Wages and Pyramid Schemes: A Mathematical Model}}, journal = {Journal of Functional Analysis}, year = {2015}, volume = {269}, number = {9}, pages = {2709–2746}, doi = {10.1016/j.jfa.2015.08.006} } -
Meeting Technologies and Optimal Trading Mechanisms in Competitive Search Markets
In a market in which sellers compete by posting mechanisms, we study how the properties of the meeting technology affect the mechanism that sellers select. In general, sellers have incentive to use mechanisms that are socially efficient. In our environment, sellers achieve this by posting an auction with a reserve price equal to their own valuation, along with a transfer that is paid by (or to) all buyers with whom the seller meets. However, we define a novel condition on meeting technologies, which we call "invariance," and show that the transfer is equal to zero if and only if the meeting technology satisfies this condition.
@article{Lester2015Meeting, author = {Lester, Benjamin and Visschers, Ludo and Wolthoff, Ronald}, title = {{Meeting Technologies and Optimal Trading Mechanisms in Competitive Search Markets}}, journal = {Journal of Economic Theory}, year = {2015}, volume = {155}, pages = {1–15}, doi = {10.1016/j.jet.2014.11.001} } -
It's About Time: Implications of the Period Length in an Equilibrium Search Model
Empirical evidence suggests that transitions between employment states are highly clustered around the first day of each workweek or month. I analyze the effect of this phenomenon by presenting an equilibrium search model in which the period length is a parameter determining the degree of clustering. Infinitesimally short periods result in a continuous-time model with bilateral meetings, while longer time periods introduce the possibility of recall or simultaneity of job offers. In this environment, I show that the period length has a profound effect on equilibrium outcomes, including the unemployment rate, unemployment duration, and the cross-sectional wage distribution.
@article{Wolthoff2014It, author = {Wolthoff, Ronald}, title = {{It's About Time: Implications of the Period Length in an Equilibrium Search Model}}, journal = {International Economic Review}, year = {2014}, volume = {55}, number = {3}, pages = {839–867}, doi = {10.1111/iere.12073} } -
Early Retirement Behaviour in the Netherlands: Evidence from a Policy Reform
In the early 1990s the Dutch labour unions and employer organisations agreed to transform the generous and actuarially unfair early retirement (ER) schemes into less generous and actuarially fair schemes that reward individuals for postponing retirement. The starting dates of these new ER programs varied by industry sector. In this study, we exploit this variation in starting dates to estimate the causal impact of the policy reform on early retirement behaviour. We use a large administrative dataset, the Dutch Income Panel 1989–2000, to estimate hazard rate models for the retirement age. We conclude that the policy reform has indeed induced workers to postpone retirement. Both the wealth effect (lower ER wealth) and the substitution effect (lower implicit taxes on retirement postponement) are significant, the latter being more substantial.
@article{Euwals2010Early, author = {Euwals, Rob and van Vuuren, Daniel and Wolthoff, Ronald}, title = {{Early Retirement Behaviour in the Netherlands: Evidence from a Policy Reform}}, journal = {De Economist}, year = {2010}, volume = {158}, number = {3}, pages = {209–236}, doi = {10.1007/s10645-010-9139-0} } -
Simultaneous Search with Heterogeneous Firms and Ex Post Competition
In this paper we study the allocation of workers over high and low productivity firms in a labor market with coordination frictions. Specifically, we consider a search model where workers can apply to high and or low productivity firms. Firms that compete for the same candidate can increase their wage offers as often as they like. We show that if workers apply to two jobs, there is a unique symmetric equilibrium where workers mix between sending both applications to the high and sending both to the low productivity sector. But, efficiency requires that they apply to both sectors because a higher matching rate in the high-productivity sector can then be realized with fewer applications (and consequently fewer coordination frictions) if workers always accept the offer of the most productive firm. However, in the market the worker's payoff is determined by how much the firm with the second highest productivity is willing to bid. This is what prevents them from applying to both sectors. For many configurations, the equilibrium outcomes are the same under directed and random search so our results are not driven by random search. We discuss the effects of increasing the number of applications and show that our results can easily be generalized to N-firms.
@article{Gautier2009Simultaneous, author = {Gautier, Pieter A. and Wolthoff, Ronald}, title = {{Simultaneous Search with Heterogeneous Firms and Ex Post Competition}}, journal = {Labour Economics}, year = {2009}, volume = {16}, number = {3}, pages = {311–319}, doi = {10.1016/j.labeco.2008.10.002} }