Job Search I Take 2: computing reservation wage


#1

I was wondering if it’s a typo in the lecture Job Search I Computing the Optimal Policy: Take 2

In the final step:

    # == Now compute the reservation wage == #

    return (1 - β) * (c + β * ψ)

Should it be (1-β) * ψ?

FYI, here we introduce \psi to calculate optimal policy, with \psi denoting the value of not accepting the offer but then behaving optimally in all subsequent periods. So we have:

\psi = c + \beta \sum_{i=1}^n V(w_i)p_i

Since it’s already the value of rejecting the offer, there’s no point in calculating (c + β * ψ).

Thanks!


#2

Yes, thank you!

You are 100% correct and that’s much appreciated.

@natashawatkins Could you please change the code?