Problem
Apply the concepts of Asymmetric Information. In particular, the concepts of Adverse Selection and Moral Hazard. Please consider the questions below and use the tools you acquired in this course to answer them. Consider also the following papers from Joseph Stiglitz and Michael Spence. The term project should be no longer than six pages.
A. Discuss why in many liability firms, the managers do not receive a fixed payment for their work, but rather they are paid according to the results (such as profits or sales).
B. Discuss the consequences of asymmetric information for Market Equilibrium. 3) Explain the basic idea of the Job Market Signalling Model.