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Game Theory on Jobs

Considering the current economy, I thought it would be interesting to apply networking concepts to job searching.

The article briefly outlines the current job market and unemployment rates and the fact that lowering unemployment rates are due to less people seeking jobs. Part of the reason that is addressed it that the job market it tough and that students find it harder to find a job that they can qualify for. On the other hand the adults have had a legitimate increase in employment rates. But we really care about the game theory that can be made out of students and job seeking.

The two players will be students seeking employment and employers seeking students. The basic outcomes are the student seeks a job, the student forgoes looking for a job and that the employer hires a student or rejects a student. For this to hold we do have to make a few assumptions, namely that the employers will always be at least looking for a employee and that it costs something, and that for students to seek a job it costs something.

Look for Employee Don’t look for employee
Seek a Job (-1,-1) (-1,0)
Not seek a Job (0,-1) (0,0)

So the most basic analysis would be something like this. And it is really easy to see that the Nash equilibrium would be do to absolutely nothing. But let’s be more realistic. If a company hires a student, both students and company gains while if only one side searches, one side loses. It won’t be completely accurate as we don’t have multiple players, but it will give a basic idea.

Find a Employee Don’t find an Employee Don’t look for an Employee
Get a Job (1,1) (1,-1) (1,0)
Rejected from a Job (-1,1) (-1,-1) (-1,0)
Don’t look for a job (0,1) (0, -1) (0,0)

If you look, and consider this a torus, the Nash equilibrium is the upper left corner because this wraps around. Not looking is obviously not the best choice and everybody should be looking and hiring employees. What’s going on in the real world?

Well there’s another dimension to add here called probability because of the fact that not everyone fits a companies requirement. Some companies reject students while students have to consider the costs of searching and failing. It could just be easier to do something else like serve, try to start your own business, go get a higher degree. So adding in the probability, it goes much more in favor of a company that this one-sided case presented.

Then what truly is the best response, the Nash Equilibrium? Well, go try it out and see if theory can be applied to some accuracy in the real world.


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September 2012