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Question 4. There are two types of worker. high productivity and low productivity. A worker knows what their type is. There is one potential employer
Question 4. There are two types of worker. high productivity and low productivity. A worker knows what their type is. There is one potential employer who only knows that a given worker is of high type with probability p and low type with probability 1 p. The employer is considering signing a onetime contract with the worker. From the employer's perspective. signing a high type worker is worth $32,000 and signing a low type worker is worth $12,000. A high type worker's opportunity cost of entering into such a contract is $25,000 {that's what they would earn ii they don't sign a contract employer}. Similarly, a low type worker's opportunity cost is $3,000. Assume that the employer is acting in a competitive market [just like in the problem sets where there were two competing employers}. Given this assumption, you can conclude that the equi' librium wage offer is the expected productivityworth oi the worker according to the employer's beliefs. Note: a worker can always opt out of signing a contract at the offered wage and save them' selves the opportunity cost [the payoff from not signing is zero]. 1. For what values oi p is there an equilibrium where a worker ends up being signed by the employer regardless of their type
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