Productivity of the high ability type is $25, productivity of the low ability type is $20. The
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Productivity of the high ability type is $25, productivity of the low ability type is $20. The cost of acquiring education level y is y for the high ability type and 3 y for the low ability type. Assume that both types are equally likely (qL = 0.5 for the high ability type, qH = 0.5 for the low ability type). Employers form beliefs about which type they face when observing the education level y.
Determine the range of y where there are
a) separating equilibria
b) pooling equilibria with no education
c) pooling equilibria with non-zero education
How can you refine the separating equilibria in part a)?
This is a question on game theory!
Related Book For
Organic Chemistry structure and function
ISBN: 978-1429204941
6th edition
Authors: K. Peter C. Vollhardt, Neil E. Schore
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