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Unformatted text preview: ay 8th. Economics 611 Game Theoretic Microeconomics
The three problems are each worth 33 points. Spring 2007 1. (Principal-agent / moral hazard)
What is the effect of the functional form for detection probabilities in the effort example
at the beginning of Handout #8? Redo that example with ð(E) = 1 – aEb], where 0 < a 1, and
output is given by (LE)c, where 0 < c < 1 In particular, answer the comparative statics questions:
How do effort, equilibrium wage, and labor hired, L, vary with a, b, and c?
2. (Insurance; moral hazard)
Later in Handout #8, we examined unemployment insurance for an example where the
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This note was uploaded on 01/13/2012 for the course ECN 611 taught by Professor Kelly,j during the Fall '08 term at Syracuse.
- Fall '08