Completed quickly and followed instructions given. Grammar, spelling, etc. was all good as well. Thank you so much! Will hire in the future.
1. Suppose there are three types of individuals: high productivity (HP), medium productivity (MP) and low productivity (LP). LP and MP workers amount for a proportion of sizes qL and qM of the entire population respectively. Suppose that individuals can choose any schooling level between 0 and 11 years. Further suppose that education gives no productivity 2 enhancements, it only awards a diploma for each year approved. LP individuals find education to be more costly as they progress through the education system relative to MP workers, and MP, in turn, do so relative to HP individuals. That is, while each year of schooling costs HP individuals $20,000, each year of schooling costs MP individuals $40,000, and each year of schooling costs LP individuals $60,000. Firms pay according to the productivity they guess each individual has. Such inference is based depending on the schooling years workers can demonstrate they have by showing the diplomas they obtained. Hence, the (lifetime) salary payed is given by the following scheme:
Salary = 200, 000 + 5, 000y if y < 5
430, 000 + 5, 000y if 5 <= y < 10
600, 000 + 5, 000y if y >= 10
a). If there is no signaling mechanism (i.e., no diplomas), what is the average productivity the firm infers from the pool of all individuals? Remember, this should come from a weighted average of productivities. (Tip: the firm should assume that the proportion of LP in every year of schooling is qL/12, and the proportion of MP in every year of schooling is qM/12.)
b). What is the offer (that is, the payments offered to HP, MP, LP, and the years of schooling required of each) the firm should make if it wants to reach a separating equilibrium using schooling as a signaling mechanism in which HP, MP and LP types choose different levels of schooling? Show that each type of worker has no incentive to choose the schooling years chosen by any of the other two types.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more