A simple model of search consider an agent who lives two, Ask an Expert

Economics

A simple model of search. Consider an agent who lives two periods. He is unemployed at the beginning of the first period and has a wage offer of w. If he accepts the wage offer w, he will work forever at that wage. If he rejects the offer, he receives an unemployment benefit of 4 dollars this period and he gets to draw a new offer next period. There are only two possible offers with equal probability next period: one wage offer of 8 dollars, and another offer of 24 dollars. The worker’s objective is to maximize the sum of expected discounted earnings. The discount factor β is 0.5.

(a) How much would the agent value today a dollar tomorrow? (Hint: use the concept of discount factor).

(b) What is the expected value of the potential offers?

(c) What is the value for the worker if he accepts the current offer w? (d) What is the value for the worker if he rejects the current w?

(e) What is his reservation wage?

View complete question

Business Economics, Economics

Category:- Business Economics
Reference No.:- M91423832

Have any Question?Write your Review or question?

Related Questions in Business Economics

What are the characteristics of perfect competition and

What are the characteristics of perfect competition, and does is exist in the real world?

What does an increase in the savings rate do for a countrys

What does an increase in the savings rate do for a country's output? Why doesn't every country do that?

In an inquiry into the nature and causes of the wealth of

In an inquiry into the nature and causes of the wealth of nations, Adam Smith listed three reasons for productivity to increase with specialization. What are these three reasons?

1 let z be a standard normal random variable with mean 0

1) Let Z be a standard normal random variable with mean = 0 and standard deviation = 1. Us the normal table to find the following answers. a) P(0 b) P(-1.22 c) Find the value Z 0 such that P(0 0 )= 0.4901. 2) On a typic ...

It is often argued that regulation is justified in cases

It is often argued that regulation is justified in cases where some form of market failure would otherwise cause an inefficient allocation of resources. Can someone help me identify possible sources of market failure tha ...

A random sample ofnbsp87nbspeighth gradenbspstudents scores

A random sample of 87 eighth grade? students' scores on a national mathematics assessment test has a mean score of 279. This test result prompts a state school administrator to declare that the mean score for the? state' ...

Lisa and david have been married for two years they have

Lisa and David have been married for two years. They have just decided that summer of 2020 should be spent in Switzerland. They figured out that in order to meet the cost of the entire vacation they would only have to de ...

A popular restaurant wants to assess if there are any

A popular restaurant wants to assess if there are any differences between customers who come at different times of day (morning, noon, and night) and whether or not they order something from the drinks menu. On Sunday, t ...

A jewerly store paid a unit price of 250 less 40 16 8 for

A jewerly store paid a unit price of $250 less 40%, 16% , 8% for a shipment of designer watches. the store's overhead expenses are 65% of cost and the required profit is 55% of coat. a. What is the regular selling price ...

A college has 220 full-time employees that are currently

A college has 220 ?full-time employees that are currently covered under the? school's health care plan. The average? out-of-pocket cost for the employees on the plan is ?$1,940 with a standard deviation of ?$520. The col ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Business Economics Expert