Question

Consider an investment bank who looks to fulfilling a high-level vacancy. The salary for this

position is $200K. The applicant pool consists of two types of candidates, a qualified type that brings in

$400K in output and an unqualified type that brings in $150K in output. 6 in 10 candidates are qualified

but the bank cannot distinguish which is which. It can screen the applicants but this will cost $3000 per

applicant and has only 70% accuracy.

(i) Should the firm screen its applicants? Show work.

(ii) What is the minimum level of accuracy beyond which the bank chooses screening?

Answer 1

Answer: