General_Signaling_Screening

General_Signaling_Screening - Signaling and Screening in...

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Unformatted text preview: Signaling and Screening in Labor Market Econ 210C UCSB April 25, 2011 Signaling Types of Workers: high productivity ( h ) and low productivity ( l ) measured in units of output. Cost of Education: C ( e , ) is twice continuously differentiable, C ( 0, ) = 0, C e ( e , ) > 0, C ee ( e , ) > 0, C ( e , ) < 0, and C e ( e , ) < 0. Utility Function: u ( w , e , ) = w- C ( e , ) . Reservation Wages: r ( h ) = r ( l ) = 0. What is the competitive CE with information asymmetry and these reservation wages? Production Technology: All firms have the access to the same CRS technology with labor as the only input. Firms are pricing-taking and risk-neutral. The price of firms output is normalized to be 1. Econ 210C UCSB Paper Signaling Quality by Education: (i) nature determines the type of a worker according to prior: prob ( type h ) = h and prob ( type l ) = l ; (ii) knowing his own type, the worker decides how much education to obtain; (iii) observing the workers education level, firms simultaneously make wage offers...
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This note was uploaded on 12/26/2011 for the course ECON 210C taught by Professor Qin during the Fall '09 term at UCSB.

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General_Signaling_Screening - Signaling and Screening in...

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