How to find the reservation wage

Assignment Help Econometrics
Reference no: EM13208532

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 ? is 0.5.

(a) Set up this worker's problem and find his reservation wage.

(b) What happens to his reservation wage as the unemployment benefit increases?

Reference no: EM13208532

Questions Cloud

Find out the average cpi for the two executables compiled : Consider a program compiled using compilers A and B running on the same processor. Find out the average CPI for the two executables compiled by compilers A and B given that the processor has a clock cycle time of 1ns.
Create a class for triangle objects : Create a class for Triangle objects..Triangle class should inherit from a Shape class and implement its own getArea() and getPerimeter() methods. create a program to test Triangle class and include a method that takes a Shape object as a parameter..
Develop a model that can be described : Develop a model that can be described in yes/no (boolean) terms. Use boolean algebra, truth tables, or logic gates to describe this model. Attach a diagram or drawing to explain your concept.
Explain ionic compound and methanol : Describe the experiment(s) (as necessary), observations (as necessary), and results (as necessary) which would allow you to distinguish between
How to find the reservation wage : 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 benef..
Explain what is the ph at equivilance point : What is the pH at equivilance point? c. What is the pH of the solution when 106.4mL of 1.721 M NaOH has been added to the 0.591 M acetic acid solution?
How can persistently weak currencies be stabilized : Discuss the topic: "How can persistently weak currencies be stabilized?"Many countries suffer from chronical economic problems, such as high inflation, high unemployment, and large trade and budget deficits.
Explain how would prepare chloro-methyloctane : How would you prepare 2-chloro-2-methyloctane in a lab begining with 2-methyl-2-octene and hydrochloric acid? It is reacted over heat with Ch2Cl2.
What is the labor share and capital share of output : Write down the firms problem in the long-run. Note the price for capital and labor are respectively, r and w. (Normalize the price of output to be 1 so that w and r are in real terms). (b) Does this production function depict constant return to sca..

Reviews

Write a Review

 

Econometrics Questions & Answers

  Compute the marginal revenue of each unit of output

Assume that the short run cost and demand data given in the table below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Compute the marginal cost and marginal revenue of each unit of o..

  Computing autonomous aggregate demand and short run output

Answer the following questions using the above data. Compute autonomous aggregate demand and compute the short-run output.

  Find probability for five employees gets a computer

A firm recieves a shipment of 100 personal computers for use by its staff. Of these 100 computers, five are defective and not usable without repair. In a particular office, there are five employees. What is the probability that each of these five e..

  Determine the decision variables

A and 20 milligrams of vitamin B while minimizing cost. An ounce of oats contributes 8.5 milligrams of vitamin A and 1.2 milligram of vitamin B, whereas an ounce of rice contributes 6.4 milligrams of A and 2.2 milligrams of B. An ounce of oats cos..

  Determine linear combination of chickens and potatoes

Michelle and James each live alone in an isolated region. They each have the same resources available, and they grow potatoes and raise chickens. If Michelle devotes all her resources to growing potatoes, she can raise 200 pounds of potatoes per y..

  Determine the economy of installing the new machines

Jennifer contemplates installing certain new machines that will reduce the labor time required on certain operations. These will increase the connected load by 10hp, but since they will operate only on certain special jobs, will add only 100 kWh p..

  How much of each good will max demand

a. How much of each good will he demand b. A tax is placed on x so that x now costs Max $2 while his income and the price of y stay the same. How much of good x does he now demand. Would Max be as well off as he was before the tax.

  Find a 90% confidence interval for the mean amount

In an examination of purchasing patterns of shoppers, a sample of 16 shoppers revealed that they spent, on average, $54 per hour of shopping. Based on previous years, the population standard deviation is thought to be $21 per hour of shopping.

  How to utilize stay-even analysis

A company currently sells 1,000 units a year at $25 per unit. The marginal cost of each unit is $12. The company is considering lowering the price by 4%. The company believes that this price discount will increase its economic profits.

  How much economic profit will each medallion holder earn

Now suppose the city council of Metropolis decides to curb congestion in the downtown area by limiting the number of taxis to 6. Applicants participate in a lottery and size winners get a medallion (a permanent license). What is the new equilibriu..

  What is the total amount which should be invested

Assume that an investor can invest the first $100,000 for a 13% return, an additional $100,000 yielding 10%, a further $100,000 earning 8% and the last $100,000 producing a 7% return. The cost of borrowing is 2% for the first $100,000, 4% for the ..

  What is the equivalent annual income

An income-producing property has an annual gross rent income of $1,000,000 and annual expenses of $300,000. Every 5 years, the parking lot need to be re-surfaced at $60,000 and every 10 years, the rood will have to be maintained at $40,000.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd