Question
Consider the Spence job market signalling model with two types. Choose all the statements below that are correct. a. If an applicant chooses an education
Consider the Spence job market signalling model with two types. Choose all the statements below that are correct.
a. If an applicant chooses an education level that is higher than what the high type is supposed to choose in equilibrium, then the employers must believe that the applicant is the high type.
b. If the high type's cost of education is higher than that of the low type's, then no separating equilibrium exists.
c. In any separating strategy profile (not necessarily an equilibrium), if the employer's belief is such that a deviating applicant is of the low type for sure, then the best deviation for the low type is to mimic the high type's education level.
d. Suppose that separating equilibria exist. The low type's payoff in such an equilibrium cannot be higher than that in a pooling equilibrium
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