Soft selling occurs when a buyer is skeptical of the usefulness of a product and the seller offers to set a price that depends on realized value. For example, suppose a sales representative is trying to sell a company a new accounting system that will, with certainty, reduce costs by 10%. However, the customer has heard this claim before and believes there is only a 40% chance of actually realizing that cost reduction and a 60% chance of realizing no cost reduction. Assume the customer has an initial total cost of $500. According to the customer's beliefs, the expected value of the accounting system, or the expected reduction in cost, is ($ )
Soft selling occurs when a buyer is skeptical of the usefulness of a product and the seller offers to set a price that depends on realized value. For example, suppose a sales representative is trying to sell a company a new accounting system that will, with certainty, reduce costs by 10%. However, the customer has heard this claim before and believes there is only a 40% chance of actually realizing that cost reduction and a 60% chance of realizing no cost reduction.
Assume the customer has an initial total cost of $500.
According to the customer's beliefs, the expected value of the accounting system, or the expected reduction in cost, is ($ )
Suppose the sales representative initially offers the accounting system to the customer for a price of $35.00.
The information asymmetry stems from the fact that the (BUYER OR SALES REP) has less information about the efficacy of the accounting system than does the (BUYER OR SALES REP . At this price, the customer (WILL OR WILL NOT) purchase the accounting system, since the expected value of the accounting system is (GREATER OR LESS) than the price.
Instead of naming a price, suppose the sales representative offers to give the customer the product in exchange for 50% of the cost savings. If there is no reduction in cost for the customer, then the customer does not have to pay.
True or False: This pricing scheme worsens the problem of information asymmetry in this scenario.
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