Part D E

MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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Part D E

2) Suppose now that the employer's beliefs are instead:
Type 1 with probability 1
A worker is { Type 1 with probability q1
if y < y*
if y > y*
Type 2 with probability 1 – q1 if y2 y*
Note this is not the same set of beliefs as in the second example in the lecture and the paper!
a) Write down the new wage schedule offered by the employer (Hint: assume workers are paid their
expected marginal product)
b) What are the plausible choices of y for each type of worker now?
c) What is the education schedule facing each of Type 1 and Type 2 workers?
d) Draw a new graph showing the wage schedule and the cost functions for both types. Clearly indicate
the payoff for each type of worker given their choices and y*
e) Can this setup result in a signalling equilibrium? If yes, what are the specific conditions and results
that support such an equilibrium, and how many equilibria are there? If not, why does this setup not
support a signalling equilibrium?
f) What wage does each type of worker make here? What is the outcome (wage minus costs) for each
type of worker?
g) How does your answer to the previous question (2f) change if the employer's beliefs are instead as
given below? Compare your answers for each of these alternative sets of employer beliefs: what effect
does getting more schooling have? Discuss.
if y< y*
Type 1 with probability qı
Type 2 with probability 1– q1 if y<y*
Type 2 with probability 1
A worker is
if y >y*
Transcribed Image Text:2) Suppose now that the employer's beliefs are instead: Type 1 with probability 1 A worker is { Type 1 with probability q1 if y < y* if y > y* Type 2 with probability 1 – q1 if y2 y* Note this is not the same set of beliefs as in the second example in the lecture and the paper! a) Write down the new wage schedule offered by the employer (Hint: assume workers are paid their expected marginal product) b) What are the plausible choices of y for each type of worker now? c) What is the education schedule facing each of Type 1 and Type 2 workers? d) Draw a new graph showing the wage schedule and the cost functions for both types. Clearly indicate the payoff for each type of worker given their choices and y* e) Can this setup result in a signalling equilibrium? If yes, what are the specific conditions and results that support such an equilibrium, and how many equilibria are there? If not, why does this setup not support a signalling equilibrium? f) What wage does each type of worker make here? What is the outcome (wage minus costs) for each type of worker? g) How does your answer to the previous question (2f) change if the employer's beliefs are instead as given below? Compare your answers for each of these alternative sets of employer beliefs: what effect does getting more schooling have? Discuss. if y< y* Type 1 with probability qı Type 2 with probability 1– q1 if y<y* Type 2 with probability 1 A worker is if y >y*
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