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This 4 page Class Notes was uploaded by Ilene Heathcote on Wednesday October 21, 2015. The Class Notes belongs to ECN 611 at Syracuse University taught by Staff in Fall. Since its upload, it has received 39 views. For similar materials see /class/225651/ecn-611-syracuse-university in Economcs at Syracuse University.
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Date Created: 10/21/15
Eoowom ws 611 Ha wdout 7 THE ECO NOMlCS OF ASYMMETRlC lNFORMATlON Screening action taken by the lessinformed agent Types 0 lt 6L lt 6H Costs To workers not firms Via task level t ct6 c06 0 Partials ctt6 gt 0 cnt6 gt 0 Ce lt 0 Cce ye lt 0 reL r6H 0 uw t l 6 W ct6 Game Stage 0 Nature selects worker type H prob A or L Stage 1 Each of two rms simultaneously offer nitely many w t contracts if a rm offers none their pro t is 0 Stage 2 Workers decide whether or not to accept any contract and if accept which one Tie breaks 1 lower t 2 accept 3 coin toss between rms Case A Types are observable Then at equilibrium type i accepts wi ti 6 0 and each rm earns zero pro ts Note odd notation Type e W 399 9H t Case B Types are not observable First the solution in Part A is not a solution now High ability break even line Pooled breakeven line Low ability break even line el i Elel 8L 0 13D1 At equilibrium both rms earn zero pro ts 13D2 No pooling equilibrium existsll W Type eL Type 9H wp tn 13D3 At a separating equilibrium TypeH workers choose a contract with wH 6H and TypeL workers choose a contract with wL 6L Can not have wH lt 3H W Type eL 39 Type 6H Wu tr And then TypeL workers choose contract 6L 0 Type eL Type 8H eH WHx tH 9L1 tr 61107 3 Type 6 L Type 9H 13D4 At a separating equilibrium Type H workers are paid 6H and the task level tH satis es 6H 0 tH6L e H eL COseL WH tH Vv 6 Wu tL t 0 Equilibria may fail to exist 1 W Type 6L Type 9H 9H v N w tH Ee e L Wt t t 0
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