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Abstract
This dissertation contists of three independent essays in the field of applied microeconomic theory. Economists have traditionally viewed the allocation of workers among jobs through the concept of comparative advantage. The first essay investigates hierarchical production models which display an absence of comparative advantages, in order to demonstrate that for hierarchical production there is a second significant allocating factor. Two results are found. First, the allocation of workers among jobs matches high ability workers with positions which value ability highly. Second, despite the fact that the models display an absence of comparative advantages--the standard theoretical explanation for why wage distributions might be skewed--the models' wage distributions are skewed to the right relative to the underlying ability distributions.
The second essay investigates an oligopoly for which sunk capacity serves as an investment in entry deterrence, but for which only price collusion is feasible. Three results are found. First, for many parameterizations an increase in the number of pre-established sellers causes an increase in the probability of entry. Second, the above positive relationship between the probability of entry and the number of pre-established sellers causes these same parameterizations to display a positive relationship between social welfare and the number of pre-established sellers. Third, some parameterizations display a limit price result where the oligopoly ensures a high investment in entry deterrence by choosing a low value for the collusive price.
What typically occurs in the labor market, is that information about a worker's ability is gradually revealed to the firms in the economy during the worker's lifetime. The third essay looks at this issue by investigating a model wherein the information is only directly revealed to the firm employing the worker; however, other firms use the individual's job assignment as a signal of ability. The equilibria derived frequently display the following two properties. First, consistent with empirical observations of internal labor market theorists, wage rates are more closely associated with jobs than with ability levels. Second, even when a firm knows with certainty the ability level of one of its workers, that worker's job assignment won't necessarily maximize the worker's output.
