HW 100 - HW10(Due Friday Dec 3 10:00am1 ECON2101 Fall 2010...

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HW10 (Due Friday, Dec 3, 10:00am 1 ) ECON2101 Fall 2010 Adverse Selection, Signaling, Moral Hazard True or False 1. In a game with asymmetric information, if there exists a pooling equilibrium, then there must be no separating equilibrium. 2. Since a signal has to be costly to be credible, a separating equilibrium may decrease the total efficiency. 3. In the optimal contract s(y) = y – R, R is higher if the agent’s outside option is better, other things being equal. 4. Medical insurance’s practice of charging copays for drugs is a method to counter moral hazard. 5. In private value auctions, if the format is changed from first price to second period, bidders will bid lower. Multiple choices 1. Suppose that low-productivity workers all have a productivity level equal to $10 in monetary terms and high-productivity workers all have a productivity of $16. The community has equal numbers of each type of worker. The local community college offers a course in microeconomics. High-productivity workers think
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