Chasing Lemons: Competition for Talent Under Asymmetric Information

Chasing Lemons: Competition for Talent Under Asymmetric Information

Daniel Ferreira, Radoslawa Nikolowa

Series number :

Serial Number: 
621/2019

Date posted :

August 27 2019

Last revised :

July 23 2020
SSRN Share

Keywords

  • Financial-Sector Labor Markets • 
  • adverse selection • 
  • Poaching

We develop a model of competition for managerial talent in which firms asymmetrically learn about the ability of their managers. In equilibrium, firms poach talent from competitors, even in the absence of gains from trade. Our main result is that firms inefficiently chase lemons: some poached managers are less productive in their new jobs.

Our model provides an equilibrium explanation for the apparent lack of portability of talent observed among some finance workers, such as security analysts and mutual fund managers. The model has predictions linking firm heterogeneity to managerial turnover, compensation, and the distribution of talent.

Authors

Real name:
Radoslawa Nikolowa