Suppose you are a hiring manager for a large firm. You have two almost identical resumes for a position. The going rate (salary) for the position is $45,000. The job candidates are both graduates from a state university, same major, about the same age, and same gender (race unknown). The academic background is roughly the same. But one is a good candidate (personality, easy going, a “go-getter”, worth $50,000) but the other is the opposite (worth $40,000). The issue is that you can’t tell them apart from the submitted application dossier documents. Questions: What is the role of asymmetric information in this market? Fully explain this concept as it applies to labor markets.
Suppose you are a hiring manager for a large firm. You have two almost identical resumes for a position. The going rate (salary) for the position is $45,000. The job candidates are both graduates from a state university, same major, about the same age, and same gender (race unknown). The academic background is roughly the same. But one is a good candidate (personality, easy going, a “go-getter”, worth $50,000) but the other is the opposite (worth $40,000). The issue is that you can’t tell them apart from the submitted application dossier documents. Questions: What is the role of asymmetric information in this market? Fully explain this concept as it applies to labor markets.
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Question
Suppose you are a hiring manager for a large firm. You have two almost identical resumes for a position. The going rate (salary) for the position is $45,000. The job candidates are both graduates from a state university, same major, about the same age, and same gender (race unknown). The academic background is roughly the same. But one is a good candidate (personality, easy going, a “go-getter”, worth $50,000) but the other is the opposite (worth $40,000). The issue is that you can’t tell them apart from the submitted application dossier documents.
Questions:
- What is the role of asymmetric information in this market? Fully explain this concept as it applies to labor markets.
- What are the chances of getting the “good” candidate if you offer $40,000?
- Devise 1 screen and 1 signal (for either the employer or/and the employee) that would allow you to hire the best person in this case.
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