pptx file

This time there is no pdf file.

If you have questions about the video or the PowerPoint, please post those as comments to this post.

This is the video I mentioned in class. I made a slight goof in the recording, so there is more black on the sides than there should be. If you watch it full screen and on a computer it shouldn't matter. On a phone, it might be too small. This is much more detail than I provided in class last week. It covers the algebra of the two state model and that is done in some depth. On the last slide there is an embedded spreadsheet that gives the graphical approach to the same model. It might be too much for you. The Excel homework (which I hope to post tomorrow) does the graphical approach in a step by step manner.

pptx file

This time there is no pdf file.

If you have questions about the video or the PowerPoint, please post those as comments to this post.

pptx file

This time there is no pdf file.

If you have questions about the video or the PowerPoint, please post those as comments to this post.

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On the slides titled "Characterizing the High Effort Solution" (6:25) you talk about the IR and IC constraints binding. I don't understand what it means for the constraints to bind. Can you explain this?

ReplyDeleteThe constraints are written as inequalities. They are of the form

ReplyDelete(IR) the expected utility of an agent taking high effort is greater than or equal to the utility of the outside option, and

(IC) the expected utility of an agent taking high effort is greater than or equal to the expected utility of an agent taking low effort.

The constraint binds means that at the optimum the constraint holds as an equality.