Understanding Business
Understanding Business
12th Edition
ISBN: 9781259929434
Author: William Nickels
Publisher: McGraw-Hill Education
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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:

  1. What is the role of asymmetric information in this market? Fully explain this concept as it applies to labor markets.
  2. What are the chances of getting the “good” candidate if you offer $40,000?
  3. 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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