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Describe how employers “choose” the optimal length of a strike in a model where there is asymmetric information.
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- Consider a variant of the benchmark model of adverse selection. The types of workers (θ) are uniformly drawn from the unit interval [0,1]. A θ-type worker can produce θ units of some product if he is hired by firms. (Workers are the only input in the production.) The price of the product is normalised as 1. Before entering the labor market, workers decide whether to secure some certificate at a cost c ∈ (0, 1) or not. The certificate can fully reveal a worker’s type and he then decides whether to show it to firms or not. If a θ-type worker decides to quit the labor market, he can earn θ/4 from self-employment. Find the competitive equilibrium. (Hint, if a θ-type worker obtains the certificate and shows it to firms, he will receive a wage of θ from the market. For sure, he can also decide to join the labor market without obtaining or showing the certificate.)Let W represents an individual’s annual earned income and U(W) = (W/10)0.5 is this individual’s von Neumann-Morgenstern utility index (or utility function) . This individual earned income is $49,000. This individual faces the prospect of a 20% chance of needing health care, with a price tag of $13,000. Assume this person is risk averse. Also assume that the insurance company has only claim costs and that administrative costs are $0. The maximum health insurance premium this individual is willing to pay is??_____ is when everyone in a country is covered by insurance that is run and administered by the government. This strategy is effective at combatting _____. a. Means tested health insurance; adverse selection b. Universal public health insurance; adverse selection c. Universal public health insurance; moral hazard d. Compulsory insurance; moral hazard e. Compulsory insurance; monopoly pricing f. Means tested health insurance; moral hazard
- Job-specific human capital. In this problem, based on a simplified version of the model in Bhattacharya and Sood (2006), we will explore how linking employment and health insurance provision can (partially) solve the adverse selection problem if the labor market is competitive. Suppose that there are two types of workers – sickly workers with probability ps of falling ill over the course of the next year, and robust workers with probability pr < ps of falling ill. Employers cannot observe whether a worker is sickly or robust, and because of U.S. law they can only decide to offer health insurance to allof their workers, or none at all. We will assume that a just-hired employee is less productive than an employee who has more experience; let MPn be the marginal value product of new employees, and MPe > MPn be the marginal value product of experienced employees. In this simple model, marginal value product depends only on experience, not on whether a worker is sickly or robust.…Question 18 Job-specific human capital In this problem, based on a simplified version of the model in Bhattacharya and Sood (2006), we will explore how linking employment and health insurance provision can (partially) solve the adverse selection problem if the labor market is competitive. Suppose that there are two types of workers – sickly workers with probability ps of falling ill over the course of the next year, and robust workers with probability pr < ps of falling ill. Employers cannot observe whether a worker is sickly or robust, and because of US law they can only decide to offer health insurance to all of their workers, or none at all. We will assume that a just-hired employee is less productive than an employee who has more experience; let MPn be the marginal value product of new employees, and MPe > MPn be the marginal value product of experienced employees. In this simple model, marginal value product depends only on experience, not on whether a worker is sickly or…There is a telling joke about two economists walking down the street. They spot a $20 bill on the sidewalk. One stoops to pick it up, but the other one says, “Don’t bother; if the bill was real, someone would have picked it up already.” The lesson is clear. A strong belief in efficient markets can disable the investor and make it appear that no research effort can be justified. Do you think there are still enough anomalies in the empirical evidence to justify the search for overpriced/underpricedsecurities? Support your answer with examples and new theories in the context of Efficient Market Hypothesis.
- Which primary care physician compensation scheme from the list below will lead to the highest level of uncertainty with respect to insurance company payments ? A. fee for service B. capitation C. Salary D. indemnification HELP PLS HURRY !!Multiple Choice Adverse selection describes a situation where an individual's demand for insurance is positively correlated with the individual's risk of loss. Adverse selection occurs when someone increases their exposure to risk when insured. This can happen, for example, when a person takes more risks because someone else bears the cost of those risks. The relationship between smoking status and mortality provides a good illustration for adverse selection, especially in the case in which a life insurance company did not vary its premiums according to smoking status of its customers. To counter the effects of adverse selection, insurers may offer premiums that are proportional to a customer's risk.Actuaries perform the crucial task of estimating the time paths and probability distributions of costs and revenues for different insurance contracts. Becoming an actuary takes several years, and involves passing a series of rigorous examinations given either by the Society of Actuaries or by the Casualty Actuarial Society. Usually, the individual works for an insurance company while studying for the exams, and the company gives the individual time off to study for the exams. Passing an exam usually results in a significant pay increase. a) Do actuaries have general or firm-specific human capital? b) Who “pays for” the worker’s time off to study for the exams? Choose one answer and explain. · the worker does, by accepting a lower salary · the firm does, to invest in the worker’s human capital c) Why does the individual get a pay increase after passing each exam? Why not evaluate the employee once per year, like many companies do?
- Indicate whether the statement is true, false, or unclear, and justify your answer.One of the major predictions of the Rothschild–Stiglitz model is a positive correlation between risk and insurance coverage. This has never been observed in practice due to the confounding influence of moral hazard.for the environment which studies asymmetric information, what happens to the interest rate paid by borrowers when the fraction of defaulters in the population increases? It decreases It increases It stays the same The effect is ambiguousIndicate whether the statement is true or false, and justify your answer.In a Rothschild–Stiglitz model separating equilibrium, low-risk consumers of insurance are quantity constrained. They cannot buy as much insurance as they want because the insurance company is worried it will lose money on them.