Interviews and Adverse Selection

Interviewing in professional labor markets is a costly process for rms. Moreover, poor screening can have a persistent negative impact on rmsbottom lines and candidatescareers. In a simple dynamic model where \u85rms can pay a cost to interview applicants who have pri-vate information about their own ability, potentially large ine ¢ ciencies arise from information-based unemployment, where able workers are rejected by \u85rms because of their lack of o¤ers in previous interviews. This e¤ect may make the market less e ¢ cient than random matching. We show that the \u85rst best can be achieved using either a mechanism with transfers or one without transfers