1. Determine the average value of a draw from the offer distribution.
2. For a given reservation level, R, determine the expected search cost.
3. For a given reservation level, R, determine the expected value of a job conditional on it being accepted.
4. The value of search for a given reservation level strategy is the sum of expected search costs and the expected value of an acceptable job. Determine the value of searching as a function of the given reservation level, U(R). Draw U(R) in a figure with R on the horizontal axis and U(R) on the vertical axis. Include the 45◦ line in the graph.
5. Determine the optimal choice of R. 6. What is the average value of a job that Jane accepts? What is the average number of offers
that Jane will draw before an acceptable offer is made?
7. Suppose that the offer distribution changes so that the lower bound is 0 dollars and the upper bound is $25,000. The distribution remains uniform so all offers between 0 and 25000 are equally likely. What is the value of the average realization from the distribution? What is Jane’s new optimal choice of R? What is the average number of offers Jane will draw before accepting? Explain why R changes and the direction of change.
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