Question
Business Factory Inc. (BFI) is in the process of hiring workers to fill some positions after a series of layoffs. It needs workers for regular
Business Factory Inc. (BFI) is in the process of hiring workers to fill some positions after a series of layoffs. It needs workers for regular positions and workers for high-level managerial positions. All workers hired by BFI stay employed at the firm approximately 10 years. In that time, workers in regular positions will be paid = 100 thousand per year, while workers in managerial positions will be paid = 250 thousand per year. In the pool of potential workers there are some who don't care at all about business management (low-interest), and there are some who enjoy that sort of thing (high-interest). BFI would like to hire high-interest workers for its managerial positions, and low-interest workers for the regular positions. However, the firm can't tell the two types of workers apart. If the firm simply posts advertisements for the job vacancies, then there's a risk that low-interest individuals could lie on their resumes, "mimicking" those with high-interest. A consultant suggests that the firm should set up an entry interview process or quiz that workers have to pass in order to be hired at a managerial position. To pass this exam, workers can receive training at a business school. The consultant believes that low-interest workers will need to train for 3 years at the school in order to pass the exam, while high-interest workers can do it in only 2 years. The yearly tuition at this school is (for both types of workers). A) Propose a value of 1 that would make workers correctly identify their own type (low or high interest) when applying for a vacancy. What is this kind of equilibrium called? B) Propose a value of 2 that would make low-interest workers willing and able to "mimic" high-interest workers. Then, propose a 3 that would make high-interest workers willing and able to mimic low-interest workers. What are these type of equilibriums called?
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