Q1 (a) Imagine a signalling model where there are two types of workers, low productivity workers with a productivity of 10, and high productivity workers with a productive of 20. The proportion of low productivity workers is .5. Firms are competitive and obtain profit equal to the productivity of the worker they hire. Workers can obtain one of three levels of education: e1, e2, and e3. Workers get utility equal to their wage minus the cost of education. Wages must be between 10 and 20. The cost of getting an education for low productivity workers is: e1 = 0, e1 = 7, e2 = 14. The cost of getting an education for high productivity workers is e1 = 0, e2 =4, e3 = 8. What is the separating equilibrium in this model? Be sure to indicate firm beliefs and wages in your description of the equilibrium.

Q1 (a) Imagine a signalling model where there are two types of workers, low productivity workers with a productivity of 10, and high productivity workers with a productive of 20. The proportion of low productivity workers is .5. Firms are competitive and obtain profit equal to the productivity of the worker they hire. Workers can obtain one of three levels of education: e1, e2, and e3. Workers get utility equal to their wage minus the cost of education. Wages must be between 10 and 20. The cost of getting an education for low productivity workers is: e1 = 0, e1 = 7, e2 = 14. The cost of getting an education for high productivity workers is e1 = 0, e2 =4, e3 = 8. What is the separating equilibrium in this model? Be sure to indicate firm beliefs and wages in your description of the equilibrium.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter15: Lean Accounting And Productivity Measurement

Section: Chapter Questions

Problem 4CE: Refer to Cornerstone Exercise 15.3. Choctaw Company provides the following additional information so...

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