An employer needs to make a hiring decision and bring new employees on board. Some preliminary research indicated that ¼ of the pool could bring $50,000 value to the company, ¼ $60,000, ¼ $70,000, and ¼ $80,000. Assuming asymmetric information and adverse selection (you don’t know what value new employees could bring) what kind of job offer the company should consider in order to hire 4 new employees? Please explain.

An employer needs to make a hiring decision and bring new employees on board. Some preliminary research indicated that ¼ of the pool could bring $50,000 value to the company, ¼ $60,000, ¼ $70,000, and ¼ $80,000. Assuming asymmetric information and adverse selection (you don’t know what value new employees could bring) what kind of job offer the company should consider in order to hire 4 new employees? Please explain.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter20: The Problem Of Adverse Selection Moral Hazard

Section: Chapter Questions

Problem 20.2IP

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