Question
4) A risk-neutral firm is considering hiring an employee for T yearswhere T>1. Suppose there is a safe worker whose value to the firm is
4) A risk-neutral firm is considering hiring an employee for T yearswhere T>1. Suppose there is a safe worker whose value to the firm is $200,000 and a risky worker whose value is either $500,000 with a 50% probability or -$100,000 with probability 50%. The firm is trying to decide which to hire. It will learn the risky workers' true value after Z years where Z < T. Bothtypeof workers would be paid the same salary of $100,000. Which of the following might cause the firm to strictly prefer the safe worker?
Group of answer choices
A high quit rate (i.e. near 1)
A short detection period of worker type
long detection period of worker type
None of the other answers listed here
A high firm discount rate
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started