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Suppose there are two types of plumbers: competent and incompetent. Both types of plumbers can get certified, but the certification takes more time and effort
Suppose there are two types of plumbers: competent and incompetent. Both types of plumbers can get certified, but the certification takes more time and effort for the incompetent types. Competent ones have to spend C months preparing for the certification exam; incompetent ones take twice as long. Certified plumbers can earn thousand dollars each year working on building sites for licensed contractors. Uncertified plumbers can only earn thousand dollars each year in freelance work; licensed contractors won't hire them. Each type of plumber gets a payoff equal to
where S is the salary measured in thousands of dollars and M is the number of months spent getting certified.
What is the lowest value of C for which a competent plumber will choose to signal with this certification but an incompetent one will not? hint: find the entire range first
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