契约理论讲义5：逆向选择2.pdf

Lecture on Contract Theory 2. Complete Contracts I: Static Bilateral Contracting Huihua NIE School of Economics Renmin University of China www.ChinaES. niehuihua(at) 2.4 Adverse Selection II: Signaling 2.4.1 Spence model: education market We follow the simplest version of Spence (1973, 1974). There are a worker and a firm. The worker’s productivity can be either r or r , with r r 0 . Let  be the firm’s prior H L H L i belief that r r . A worker of type i L,H can get e years of education at cost c(e) e i i before entering the labor market. The key assumption is that   , and education has nothing H L to do with productivity. The worker’s utility function is u r e . Obviously, the setting i i i  dr  u / e  satisfies S-M condition ( ( ) [ ] (i ) 1 0 ). Suppose that the worker  de  u / r     (agent①) has all the bargaining power over the firm (principal). Recall section 2.3.5. The timing is as figure 5-1. t=0 t=1 t=2 t=3 t=4 time