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Author Question: The cost, c, of a college education that serves only as a signal of a high-quality worker is ...  (Read 44 times)

olgavictoria

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The cost, c, of a college education that serves only as a signal of a high-quality worker is $20,000. The wage of a known high-quality worker, wh, is $75,000. The wage for a known low-quality worker, wl, is $50,000. For what value of the share of the work force that is of high quality, t, is a pooling equilibrium possible?

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Marked as best answer by olgavictoria on Jun 18, 2019

kthug

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The high-quality workers will not go to college if This can be rearranged so that By substituting in the numbers, t > 1/5 will result. Thus, with a share of the work force that is high quality that is greater than 1/5, a pooling equilibrium can result.


kthug

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