# Econ3014 : game theory exercise 4 1.

Document Preview:
ECON3014 : GAME THEORY Exercise 4 1. Consider a competitive labor market with a continuum of workers. Each worker is characterized by his productivity 2 fH; Lg. The proportion of workers with type H is . Before applying for a job, each worker chooses the level of his education e 0. The education is costly and has no eect on productivity. If a worker with productivity gets an education e and a wage ! his payois U(e; !; ) = ! ?? e2 : If a worker decides not to participate in the job market, he gets zero payo. a) Argue that in the competitive market, a wage paid to a worker equals to his expected productivity (conditional on all the information about this worker known to rms). b) What is the dierence between separating and pooling equilibria in this model? Find the separating equilibrium with the lowest possible education level for the high type. c)What is the largest level of education that can be chosen by workers with productivity H in equilibrium in this model? d) Find a pooling equilibrium in this model. e) Suppose the equilibrium that you found in b) is played. The government comes up with a bill that prohibits wage discrimination based on education (i.e. holding other publicly observable workers’ characteristics the same, rms can not oer dierent wages to people with dierent education levels). To pass the bill, the government holds a referendum in which only workers can vote. Assuming that voters vote sincerely, i.e. voters pick an alternative that gives them the highest payo, and that a simple majority is required for passing the bill, derive a necessary and sucient condition for passing this bill (the condition must be formulated in terms of fundamentals of the model) 2. Firm A (the acquirer”) is considering taking over rm T (the target”). It does not know rm T’s value; it believes that this value, when rm T is controlled by its own management, is at least \$0 and at most \$100, and assigns equal probability to each of the 101 dollar values in this range. Firm…

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

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.

### Money-back guarantee

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.

### Zero-plagiarism guarantee

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.

### Free-revision policy

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.