Quiz 2

Signalling Games

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Python Week 1: the first filter for runtime behavior
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# Signalling Games ## Spence's Education Model **Workers:** Type $\theta \in \{L, H\}$ (productivity) **Education:** Cost $c(\theta, e) = e/\theta$ (higher types find education cheaper) **Firms:** Pay wage equal to expected productivity given observed education **Separating equilibrium:** $H$ chooses $e^* > 0$, $L$...

Signalling Games

Spence's Education Model

Workers: Type θ∈{L,H}\theta \in \{L, H\} (productivity) Education: Cost c(θ,e)=e/θc(\theta, e) = e/\theta (higher types find education cheaper) Firms: Pay wage equal to expected productivity given observed education Separating equilibrium: HH chooses e∗>0e^* > 0, LL chooses e=0e=0. Firms pay w=Hw = H for e≥e∗e \geq e^*, w=Lw = L for e<e∗e < e^*. Condition: e∗e^* must satisfy e∗L≥H−L\frac{e^*}{L} \geq H - L (no incentive for LL to mimic) and e∗H≤H−L\frac{e^*}{H} \leq H - L (HH prefers to signal). Join Discord PreviousBayesian GamesNextAuctions & Mechanism Design
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