This is the last Excel Homework.
This homework is on extensions of the basic Shapiro and Stiglitz model, with a particular focus on making the monitoring intensity a choice variable.
You should watch the video presentation of the basic model first. This is a full lecture on the math of the model. It takes about a half hour. (If you want the PowerPoint file, a link to it is in the description of the video.)
The actual Shapiro and Stiglitz paper: http://www.jstor.org/stable/1804018
The video that derives the equations from the paper: http://youtu.be/upUrdaLNIss
xlsx file: https://uofi.box.com/s/cyuy1v6kfs8dfl3n43kopbp801n79sbo
Dear Pr. Arvan,
ReplyDeleteI'm struggling with the second question of the homework. I found the optimal monitoring intensity correctly, but then the No Shrinking Condition when looking for the optimal wage seems to yield an incorrect answer. I'm using the value I get from the right side of the inequality.
Figured it out. The value provided was r*Vu, not just Vu.
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