Unformatted text preview: μ and φ be multipliers on the IC and promise keeping (and let π ( θ H ) = π ) FOC w.r.t c ( w,θ ) π ³ 1-ˆ λ 1 u ( c ( w,θ H )) ´ + φπ + μ = 0 (1-π ) ³ 1-ˆ λ 1 u ( c ( w,θ L )) ´ + φπ-μ = 0 FOC w.r.t w ( w,θ ) π ˆ βP ( w,θ H ) + φπβ + βμ = 0 (1-π ) ˆ βP ( w,θ L ) + φ (1-π ) β-βμ = 0 52...
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- Fall '10
- wong
- Calculus, Windows games, November 29, FOC w.r.t, incentive constraint binds
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