Question

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
$55,000	0.25
$74,000	0.25
$93,000	0.25
$112,000	0.25

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

Answer 1

Employee value	Probability
55000	.25
74000	.25
93000	.25
112000	.25

A. Expected value = Employee value * Probability = 83500

B. If salary is higher or equal to 83500, then we have only, last two Employee value rows available with us.

Considering 93,000 and 112000 with equal probabilities of 0.50 each we get,

Expected value =   Employee value * Probability = 102,500