Creating problem sets is more difficult than solving them, I believe. Sure, you can make a problem up, but the difficulty is making up a problem which a) students can solve given the information provided, b) makes sense, and c) you can solve without spending all of your time tearing your hair out. In this case, I ended up failing on pretty much all three counts.
I created a problem set for my now-ex-micro tutorial students so that they had a few more problems to look at before the exam. One of the questions pertains to a principal-agent problem, and I can say that I definitely chose the low-effort outcome on this one. I gave them three problems (which is two fewer than I originally planned). The first problem I didn’t even solve, due to the fact that it’s a big, complicated general equilibrium setup and I don’t have the time to go through, solve, and double-check it. The second problem pertains to general equilibrium under uncertainty. In this case, I made a small mistake with big consequences: I tried to involve the natural log of 0. Dan probably snorted so hard his coffee blew out of his nose at that one, so I apologize for sending hot water through your sinuses, Dan. Plus, as an added bonus, I had a vestigal problem thrown in. I originally wanted to have the person trade his product on a market and receive another good in return, but I didn’t flesh out that part, so it was kind of like Antonio Alfonseca’s 6th finger: slightly disturbing and totally useless.
Now, the third problem was the best. This was the sole asymmetric information problem I had. Instead of having examples of adverse selection, moral hazard, and principal-agent, I just went with the latter with the excuse that they’re all solved in the same way anyhow. This problem, as I sent it out to those students, was rather incomplete and also significantly more difficult than I wanted it to be. So I basically re-wrote half of the problem as I solved it. I did this so that I didn’t have to solve a problem which is actually difficult.
The important thing, however, is that I’m done. The low-effort equilibrium has been achieved but they can’t do anything about it…
Ln(0) is Gloria the Invisible Pink Unicorn Who Can Shoot Lasers Out of Her Butthole. Sometimes she sears her tail-hair.
Comment by Daniel J. 'Daniel J. Gudorf' Gudorf — February 25, 2007 @ 12:19 pm
When I try to calculate ln(0), all I get is an Error 2: Calculate. I guess this is what I get for buying the Sharp calculator rather than the TI. But hey, at least the Sharp one has a solving feature. Eat it, TI-83: I didn’t have to do algebra problems!
Comment by Kevin 'Joooooooooo!!!' Feasel — February 25, 2007 @ 1:05 pm