Question
Suppose that the cost to the employee of working hard is $200. If the employee works hard, the firm will be satisfied with his performance
Suppose that the cost to the employee of working hard is $200. If the employee works hard, the firm will be satisfied with his performance with probability one. If the employee does not work hard, the firm detects this lack of effort with probability p: If the firm discovers that the employee has not worked hard, the employees performance is judged to be unsatisfactory and he is fired. The current wage for the employee is $900. If the employee is fired, he immediately obtains his next-best employment opportunity, which pays $300. The employee will choose to work hard if p is greater than ___________.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started