Q2. What have the authors stated for future works in "Wage differentials, discrimination and efficiency∗" ?
The reason is that, when offering a wage, a firm must take into account not only workers ’ tradeoff between the wage and the current employment probability, but also the tradeoff between the current wage and the probability of getting higher wage in the future. Perhaps a quantitative analysis can be conducted.
Q3. What is the queue length of workers for a type A firm?
Because a type A firm does not rank the workers, the queue length of workers for the firm is qAT + qAS , which is temporarily denoted k.
Q4. What is the condition that holds if and only if the following condition holds?
Then the required condition holds if and only if the following condition holds:0 < δ − (1 + δ) (1− γ)θe −γθ e(1−γ)θ − 1 + qdAS (1 + δ) (eγθ − 1) .
Q5. What is the probability of a type j worker at a firm?
In the limit where the economy becomes infinitely large, the probability with which firm i attracts one or more type j worker is 1− (1− γjαij)N → 1− e−qij .
Q6. What is the expected profit of the deviator?
The deviator’s expected profit is πdA = ³ 1− e−qdAT ´ (1 + δ)y − qdAT bET + ³e−qdAT − e−kd´ y − qdAS bES= (1 + δ)y − (1 + qdAT ) bET − qdAS bES .
Q7. What is the reason why workers are willing to take a larger wage cut?
Since high-productivity workers are given a higher employment probability through the ranking scheme, they are willing to take a larger wage cut to maintain this difference in the employment probability.