Individual Problems 19-6

You need to hire some new employees to staff your startup venture. You know that potential employees are distributed throughout the population as follows, but you can't distinguish among them:

Employee Value Probability

$55,0000 .25

$74,0000 .25

$93,0000 .25

$112,0000 .25

The expected value of hiring one employee is.____________

Suppose you set the salary of the position equal to the expected value of an employee. Assume that employees will not work for a salary below their employee value.

The expected value of an employee who would apply for the position, at this salary, is__________.

Given this adverse selection, your most reasonable salary offer (that ensures you do not lose money) is ______________.