Provide examples of activities that students can participate in which can generate credible information for employers once you graduate. Explain how these examples fit in the framework of signalling: why is the activity costly, how does it help separate different types of students, why can employers not credibly learn this information in other ways? A master student interested in pursuing a PhD is deciding between two courses: advancedgame theory x = A and introduction to game theory x = I. The student can be one oftwo types: 0 = L or 0= H.The PhD admission officer can observe the courses chosen by the student x = {A, I} butnot the type of the student 0. Before observing the course chosen by the student, shebelieves both types are equally likely. She admits students only if she is sure that theyare type 0 = H (that is if she believes P(0 = H|x) = 1).The student gets 10 units of utility from being admitted to a PhD and 0 units if notadmitted, and pays costs c(0) if she chooses advanced game theory and costs 0 if shechooses introduction to game theory. We assume that c(H) = 0 < c(L) = 15.

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Provide examples of activities that students can participate in which can generate credible information for employers once you graduate. Explain how these examples fit in the framework of signalling: why is the activity costly, how does it help separate different types of students, why can employers not credibly learn this information in other ways?

A master student interested in pursuing a PhD is deciding between two courses: advanced
game theory x = A and introduction to game theory x = I. The student can be one of
two types: 0 = L or 0= H.
The PhD admission officer can observe the courses chosen by the student x = {A, I} but
not the type of the student 0. Before observing the course chosen by the student, she
believes both types are equally likely. She admits students only if she is sure that they
are type 0 = H (that is if she believes P(0 = H|x) = 1).
The student gets 10 units of utility from being admitted to a PhD and 0 units if not
admitted, and pays costs c(0) if she chooses advanced game theory and costs 0 if she
chooses introduction to game theory. We assume that c(H) = 0 < c(L) = 15.

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