The Cost,c,of a College Education That Serves Only as a Signal

question 28

Essay

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,w₁,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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Definitions:

Performance Evaluation

The process of examining how well investments or portfolios have done over a period, comparing their returns against benchmarks or objectives.

Survivorship Bias

The analytical error of focusing only on entities that have "survived" a selection process, ignoring those that have failed.

Infrequently-Traded Assets

Assets that do not trade on a regular basis on the secondary market, making their valuation and liquidity different from frequently traded assets.

Liquidity Premiums

Additional returns investors demand for holding securities that are not easily convertible to cash without a loss in value.