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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
population as follows, but you can’t distinguish among them:
Employee Value
Probability
$50,000
0.25
$60,000
0.25