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Suppose you are hiring a worker for a business. You advertise a position for $40,000, but...

Suppose you are hiring a worker for a business. You advertise a position for $40,000, but an applicant offers to work for $35,000. Should you jump at this offer? Explain what informational problem you face and how that affects your decision.

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Answer #1

I should not be jumping for the offer. There is an information asymmetry as I am not aware of the capabilities and the suitability of the applicant for the position offered. Since the applicant is willing to work for less than what is offered, it may well be the case that the applicant lacks in skills or capabilities. Therefore, here is an informational problem because of which I will not jump for the offer and I will try to gather as much as information as possible to solve the informational problem.

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