Consider a hypothetical graduate job market in which a certificate does not improve productivity. High-productivity graduates find it cheaper to obtain than low-productivity graduates. How can the certificate support a separating equilibrium?

Question

Answer

Employers must already observe each graduate's productivity perfectly

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All graduates must choose the certificate

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The wage gain can exceed the high type's cost while remaining below the low type's cost

Answer

The certificate must increase every graduate's productivity

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Consider a hypothetical graduate job market in which a certificate does not impr...

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