Wednesday

April 1, 2015

April 1, 2015

Posted by **Myolie** on Thursday, January 31, 2008 at 9:58pm.

a) How large must the wage offer be in order for the worker to rationally accept the safe job? what is the firms' maximum payoff in this case? [hint: the parameter "y" must be included in the answer. Use e>0 to indicate a "positive small amount"]

b)How large must the wage offer be in order for the worker to rationally accept the risky job? What is the firm's maximum payoff in this case? [hint: the parameter q should be included in the answer. Use e>0 to indicate a "positive small amount"]

c) What is the firm's optimal contract offer for this case in which q=1/2 ? [hint: your answer should include an inequality describing conditions under which z=1 is optimal.]

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