<p>A vacant job is an <strong>asset</strong> if we consider that the firm can match with a worker and get a positive expected profit. Firms post vacancies up to a point where <span class="math-container">$V=0$</span>. If <span class="math-container">$V$</span> were positive, more firms would enter, would post additional vacancies, and would get a <span class="math-container">`</span>rent' (by matching with worker).</p>

CC BY-SA 4.0
2019-04-04T11:19:41.107Z
That clarifies things a bit. However, we said that $J$ was the expected profits from an occupied job. And it is only then that the firm will realise the profits. So $V$ is simply a hypothetical? Clearly the vacancy in and of itself cannot generate any profits, it is only when they match with an unemployed worker that profits are realised.   I feel like I am overcomplicating things but the idea of a vacancy being an asset is just too strange for me.
user11767
CC BY-SA 4.0
2019-04-03T20:50:59.210Z
2019-04-03T20:50:59.210Z
emeryville
<p>In the most basic Diamond-Mortensen-Pissarides (DMP) model we have the variable <span class="math-container">$V$</span> which represents the present discounted value of expected profits from a vacant job. The corresponding Bellman equation is</p>

<p><span class="math-container">$rV = -pc + q(\theta)(J-V)$</span></p>

<p>Where <span class="math-container">$pc$</span> is the cost of a vacant job per unit of time, <span class="math-container">$q(\theta)$</span> is the rate at which vacancies are filled and <span class="math-container">$J$</span> is the present discounted value of expected profits from an occupied job. If I think of a vacancy as an asset for the firm the Bellman equation makes sense but how can a vacancy be an asset? </p>

<p>What I don't understand is the intuitive meaning of <span class="math-container">$V$</span>. How can a vacant job result in profits for the hiring firm? Furthermore, my textbook says</p>

<blockquote>
  <p>In equilibrium all profit opportunities from new jobs are exploited, driving rents from vacant jobs to zero. Therefore the equilibrium condition for the supply of vacant jobs is <span class="math-container">$V=0$</span></p>
</blockquote>

<p>Again, how are there 'rents' from having a vacant job?</p>

<macroeconomics><labor-economics><search-and-matching>
DMP Search Model - Terminology
user11767
# DMP Search Model - Terminology

(Asked by: username_0 on 2019-04-03)

In the most basic Diamond-Mortensen-Pissarides (DMP) model we have the variable $V$ which represents the present discounted value of expected profits from a vacant job. The corresponding Bellman equation is

$rV = -pc + q(\theta)(J-V)$

Where $pc$ is the cost of a vacant job per unit of time, $q(\theta)$ is the rate at which vacancies are filled and $J$ is the present discounted value of expected profits from an occupied job. If I think of a vacancy as an asset for the firm the Bellman equation makes sense but how can a vacancy be an asset?

What I don't understand is the intuitive meaning of $V$. How can a vacant job result in profits for the hiring firm? Furthermore, my textbook says

> In equilibrium all profit opportunities from new jobs are exploited, driving rents from vacant jobs to zero. Therefore the equilibrium condition for the supply of vacant jobs is $V=0$

Again, how are there 'rents' from having a vacant job?

**Tags:** macroeconomics, labor-economics, search-and-matching


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## 1 answers

### Answer by username_1 on 2019-04-03. Score: 1

A vacant job is an **asset** if we consider that the firm can match with a worker and get a positive expected profit. Firms post vacancies up to a point where $V=0$. If $V$ were positive, more firms would enter, would post additional vacancies, and would get a `rent' (by matching with worker).

> **Comments:**
> **username_0**: That clarifies things a bit. However, we said that $J$ was the expected profits from an occupied job. And it is only then that the firm will realise the profits. So $V$ is simply a hypothetical? Clearly the vacancy in and of itself cannot generate any profits, it is only when they match with an unemployed worker that profits are realised.   I feel like I am overcomplicating things but the idea of a vacancy being an asset is just too strange for me.  

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