markets? If so, which one? If you enter, what is your
expected profit?
Individual Problem 17-4: Your company has a customer
who is shutting down a production line, and it is your
responsibility to dispose of the extrusion machine. The
company could keep it in inventory for possible future
product and estimates that the reservation value of
$250,000. Your dealings on the second-hand market lead
you to believe that these is a 0.4 chance a random buyer
will pay $300,000 a 0.25 chance the buyer will pay
$350,000, a 0.1 chance the buyer will pay $400,000, and a
0.25 chance it will not sell. If you must commit to a posted
price, what prices maximizes profit?
Froeb et al.’s Chapter 19:
b) Individual problems: 19–5 and 19–6.
Individual Problem 19-5: Soft selling occurs when a buyer
is skeptical of the usefulness of a product and the seller
offers to set a price that depends on realized value. For
example, suppose you’re trying to sell a company a new
accounting system that will reduce costs by 10%. Instead
of naming that price, you offer to give them the product in
exchange for 50% of their cost savings. Describe the
information asymmetry, the adverse selection problem,
and why soft selling is a successful signal.
Individual Problem 19-6: You need to hire some new
employees to staff your start-up venture. You know that
potential employees are distributed throughout the