7. Individual Problems 19-6 You need to hire some new employees to staff your startup venture. You know that potential employees are distributed throughout the population as follows, but you can't distinguish among them: Employee Value Probability $30,000 0.1 $49,000 0.1 $68,000 0.1 $87,000 0.1 $106,000 0.1 $125,000 0.1 $144,000 0.1 $163,000 0.1 $182,000 0.1 $201,000 0.1 The expected value of hiring one employee is $ $68,000 Suppose you set the salary of the position equal to the expected value of an employee. Assume that em employee value. not work for a salary below their $49,000 $30,000 The expected value of an employee who would apply for the position, at this salary, is $ Given this adverse selection, your most reasonable salary offer (that ensures you do not lose money) is $87,000
7. Individual Problems 19-6 You need to hire some new employees to staff your startup venture. You know that potential employees are distributed throughout the population as follows, but you can't distinguish among them: Employee Value Probability $30,000 0.1 $49,000 0.1 $68,000 0.1 $87,000 0.1 $106,000 0.1 $125,000 0.1 $144,000 0.1 $163,000 0.1 $182,000 0.1 $201,000 0.1 The expected value of hiring one employee is $ $68,000 Suppose you set the salary of the position equal to the expected value of an employee. Assume that em employee value. not work for a salary below their $49,000 $30,000 The expected value of an employee who would apply for the position, at this salary, is $ Given this adverse selection, your most reasonable salary offer (that ensures you do not lose money) is $87,000
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:7. Individual Problems 19-6
You need to hire some new employees to staff your startup venture. You know that potential employees are distributed throughout the population as
follows, but you can't distinguish among them:
Employee Value
Probability
$30,000
0.1
$49,000
0.1
$68,000
0.1
$87,000
0.1
$106,000
0.1
$125,000
0.1
$144,000
0.1
$163,000
0.1
$182,000
0.1
$201,000
0.1
The expected value of hiring one employee is $
$68,000
Suppose you set the salary of the position equal to the expected value of an employee. Assume that em
employee value.
not work for a salary below their
$49,000
$30,000
The expected value of an employee who would apply for the position, at this salary, is $
Given this adverse selection, your most reasonable salary offer (that ensures you do not lose money) is
$87,000
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