Henceforth, suppose there are two types of deckhands, both equally productive.

“Type As” are willing to take significant risks, whereas “Type Bs” are very concerned about their personal safety. When making hiring decisions, fishing companies cannot observe who is of Type A and who is of Type B, and because revenue sharing is used, all deckhands on a ship must get paid the same. LO4

(a) Explain how the composition of employed deckhands (i.e., the percentage of As versus Bs) varies over the year’s seasons. Also, explain how the resulting pay level varies across the year’s seasons.

(b) How do your explanations in #2 depend on the relative supply of “A” and

“B” workers and the difference between As and Bs in their tolerance for risk?

(c) If the difference in preferences between As and Bs is extreme, are there any changes to the compensation system (and to recruiting and screening processes)

you’d recommend? If so, explain them. What if the difference in preferences between As and Bs is very mild?