微觀經(jīng)濟(jì)學(xué)（平狄克、魯賓費(fèi)爾德）第六版課后答案--微觀經(jīng)濟(jì)學(xué)英文原版--CH17_PINDYCK

1、Chapter 17Markets with Asymmetric InformationTopics to be DiscussedQuality Uncertainty and the Market for LemonsMarket SignalingMoral HazardThe Principal-Agent ProblemManagerial Incentives in an Integrated FirmAsymmetric Information in Labor Markets: Efficiency Wage Theory2IntroductionWe can see wha

2、t happens when some parties know more than others asymmetric informationFrequently a seller or producer knows more about the quality of the product than the buyer doesManagers know more about costs, competitive position and investment opportunities than firm owners3Quality Uncertainty and the Market

3、 for LemonsAsymmetric information is a situation in which a buyer and a seller possess different information about a transactionThe lack of complete information when purchasing a used car increases the risk of the purchase and lowers the value of the carMarkets for insurance, financial credit and em

4、ployment are also characterized by asymmetric information about product quality4The Market for Used CarsAssumeTwo kinds of cars high quality and low qualityBuyers and sellers can distinguish between the carsThere will be two markets one for high quality and one for low quality5The Market for Used Ca

5、rsHigh quality marketSH is supply and DH is demand for high qualityLow quality marketSL is supply and DL is demand for low qualitySH is higher than SL because owners of high quality cars need more money to sell themDH is higher than DL because people are willing to pay more for higher quality6The Le

6、mons ProblemPHPLQHQLSHSLDHDL5,00050,00050,00010,000DLMarket price for high quality cars is $10,000.Market price for low quality cars is $5000.50,000 of each type are sold.7The Market for Used CarsSellers know more about the quality of the used car than the buyerInitially buyers may think the odds ar

7、e 50/50 that the car is high qualityBuyers will view all cars as medium quality with demand DMHowever, fewer high quality cars (25,000) and more low quality cars (75,000) will now be soldPerceived demand will now shift8The Lemons ProblemPHPLQHQLSHSLDHDL5,00050,00050,00010,000DLMedium quality cars se

8、ll for $7500, selling 25,000 high quality and 75,000 low quality.The increase in QL reduces expectations and demand to DLM. The adjustment process continues until demand = DL. DM25,0007,50075,0007,500DMDLMDLM9The Market for Used CarsWith asymmetric information:Low quality goods drive high quality go

9、ods out of the market - the lemons problemThe market has failed to produce mutually beneficial tradeToo many low and too few high quality cars are on the marketAdverse selection occurs; the only cars on the market will be low quality cars10Market for InsuranceOlder individuals have difficulty purcha

10、sing health insurance at almost any priceThey know more about their health than the insurance companyBecause unhealthy people are more likely to want insurance, the proportion of unhealthy people in the pool of insured people risesPrice of insurance rises so healthy people with low risk drop out pro

11、portion of unhealthy people rises, increasing price more11Market for InsuranceEx: Auto insurance companies are targeting a certain population males under 25They know some of the males have low probability of getting in an accident and some have a high probabilityIf they cant distinguish among insure

12、d, they will base premium on the average experienceSome with low risk will choose not to insure, which raises the accident probability and rates12Market for InsuranceA possible solution to this problem is to pool risksHealth insurance government takes on role as with Medicare programProblem of adver

13、se selection is eliminatedInsurance companies will try to avoid risk by offering group health insurance policies at places of employment and thereby spreading risk over a large pool13Market for InsuranceThe Market for CreditAsymmetric information creates the potential that only high risk borrowers w

14、ill seek loansCan end up with a lemons problem againHowever, banks and credit agencies use credit histories to gauge risk of borrowers14Importance of Reputation and StandardizationAsymmetric Information and Daily Market DecisionsRetail sales return policiesAntiques, art, rare coins real or counterfe

15、itHome repairs unique informationRestaurants kitchen status15Implications of Asymmetric InformationHow can these producers provide high-quality goods when asymmetric information will drive out high-quality goods through adverse selection?ReputationYou hear about restaurants or stores that have good

16、or bad service and qualityStandardizationChains that keep production the same everywhere McDonalds, Olive Garden16Implications of Asymmetric InformationYou look forward to a Big Mac when traveling, even if you would not typically buy one at home, because you know what to expectHoliday Inn once adver

17、tised “No Surprises” to address the issue of adverse selection17Lemons in Major League BaseballRules in baseball changed so that after 6 years a player could either re-sign with their team or become a free agent and try to sign with another teamFree agents create a secondhand market in baseball play

18、ersIf a lemons market exists, free agents should be less reliable (disabled) than renewed contracts18Player DisabilityDays on Disabled List per SeasonPre ContractPost ContractPercent ChangeAll Players4.7312.55165.4Renewed Players4.769.68103.4Free Agents4.6717.23268.919Lemons in Major League Baseball

19、FindingsDays on the disabled list increase for both free agents and renewed playersFree agents have a significantly higher disability rate than renewed playersThis indicates a lemons market20Market SignalingThe process of sellers using signals to convey information to buyers about the products quali

20、tyFor example, how do workers let employers know they are productive so they will be hired?21Market SignalingWeak signal could be dressing wellIs weak because even unproductive employees can dress wellStrong SignalTo be effective, a signal must be easier for high quality sellers to give than low qua

21、lity sellersExampleHighly productive workers signal with educational attainment level22Model of Job Market SignalingAssume two groups of workersGroup I: Low productivityAverage Product & Marginal Product = 1Group II: High productivityAverage Product & Marginal Product = 2The workers are equally divi

22、ded between Group I and Group IIAverage Product for all workers = 1.523Model of Job Market SignalingCompetitive Product MarketP = $10,000Employees average 10 years of employmentGroup I Revenue = $100,000(10,000/yr. x 10 years)Group II Revenue = $200,000(20,000/yr. X 10 years)24Model of Job Market Si

23、gnalingWith Complete Informationw = MRPGroup I wage = $10,000/yr.Group II wage = $20,000/yr.With Asymmetric Informationw = average productivityGroup I & II wage = $15,000/yr.25Model of Job Market SignalingIf use signaling with educationy = education index (years of higher education)Assume all benefi

24、ts encompassed in years of educationC = cost of attaining educational level yTuition, books, opportunity cost, etc.Group I CI(y) = $40,000yGroup II CII(y) = $20,000y26Model of Job Market SignalingCost of education is greater for the low productivity group than for high productivity groupLow producti

25、vity workers may simply be less studiousLow productivity workers progress more slowly through degree program27Model of Job Market SignalingAssume education does not increase productivity with only value as a signalFind equilibrium where people obtain different levels of education and firms look at e

26、ducation as a signalDecision Rule:y* signals GII and wage = $20,000Below y* signals GI and wage = $10,00028Model of Job Market SignalingDecision Rule:Anyone with y* years of education or more is a Group II person offered $20,000Below y* signals Group I and offered a wage of $10,000y* is arbitrary, b

27、ut firms must identify people correctly29Model of Job Market SignalingHow much education will individuals obtain given that firms use this decision rule?Benefit of education B(y) is increase in wage associated with each level of educationB(y) is initially 0, which is the $100,000 base 10 year earnin

28、gsContinues to be zero until reach y*30Model of Job Market SignalingThere is no reason to obtain an education level between 0 and y* because earnings are the sameSimilarly, there is no incentive to obtain more than y* level of education because once hit the y* level of pay, there are no more increas

29、es in wages31Model of Job Market SignalingHow much education to choose is a benefit cost analysisGoal: obtain the education level y* if the benefit (increase in earnings) is at least as large as the cost of the educationGroup I:$100,000 2.5Group II:$100,000 $20,000y*, y* Qf ,B = .3Qf + .2(Q - Qf)If

30、Q Qf ,B = .3Qf - .5(Qf - Q)71Managerial Incentives in an Integrated FirmAssume true production limit is Q* = 20,000Line for 20,000 is continued for outputs beyond 20,000 to illustrate the bonus scheme but dashed to signify the infeasibility of such productionBonus is maximized when firm produces at

31、its limit of 20,000; the bonus is then $600072Incentive Design in an Integrated FirmOutput(units per year)2,0004,0006,00010,000010,00020,00030,00040,000Bonus($ peryear)8,000If Qf = 30,000,bonus is $4,000,the maximumamount possible.Qf = 30,000Qf = 10,000If Qf = 10,000,bonus is $5,000.Qf = 20,000If Qf

32、 = Q* = 20,000,bonus is $6,000.73Efficiency Wage TheoryIn a competitive labor market, all who wish to work will find jobs for a wage equal to their marginal productHowever, most countries economies experience unemployment74Efficiency Wage TheoryThe efficiency wage theory can explain the presence of

33、unemployment and wage discriminationIn developing countries, productivity depends on the wage rate for nutritional reasons75Efficiency Wage TheoryThe shirking model can be better used to explain unemployment and wage discrimination in the United StatesAssumes perfectly competitive marketsHowever, workers can work or shirkSince performance information is limited, workers may not get fired76Efficiency Wage TheoryIf workers are paid