The Laboratory Approach

In the theoretical literature on optimal job search, models have been developed for infinite and finite search horizons, costly and subsidized search, zero and positive discount rates, search with and without recall of past wage offers, and known and unknown wage offer distributions. Much of the literature involves models of search by individual agents, although some papers embed job search in a market context. This body of theory can be tested with laboratory and field experiments and with econometric analysis of data from the historical record. Each approach has its advantages and disadvantages. This paper explains how the theory can be tested with controlled experiments, reviews the literature on laboratory job search experiments, and reports some new experiments on search with recall opportunities. We consider experiments that are designed to test finite horizon models of search by an individual agent that have the formal structure of stochastic dynamic programming models. The decision task faced by our subjects is much more complicated than those in most individual choice experiments because of the dynamic nature of the search environment. Consider, for example, an experiment designed to test a sequential job search model. Suppose that the subject receives an offer in some period that is not the last period in the search horizon. The offer is a certain amount of money. However, if the subject accepts the offer then he must forgo the