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Suppose that: . The employee has an outside offer to work for $27 per hour, for 1500 hours per year . The employee currently works

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Suppose that: . The employee has an outside offer to work for $27 per hour, for 1500 hours per year . The employee currently works for $20 per hour, for 2000 hours per year . The switching cost can be either high ($1'000) or low ($50) . The high switching cost has probability 40%; the low switching cost 60% Suppose that the cost of losing the employee is $1500, but also the probability of high cost drops to 5%. The optimal offer policy is to Match outside offers. True or False

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