Evaluating Competing Wage Offers
A consulting firm needs to hire exactly 15 junior analysts. The HR department presents two viable hiring strategies based on market research about the reservation wages of potential candidates:
- Strategy A: Offer an annual salary of €75,000. At this salary, exactly 15 qualified candidates are willing to accept the job. The reservation wages of these 15 individuals range from €60,000 to €75,000.
- Strategy B: Offer an annual salary of €80,000. At this salary, 25 qualified candidates are willing to accept the job. The reservation wages of these 25 individuals range from €60,000 to €80,000.
From a purely cost-minimization perspective, which strategy should the firm's Chief Financial Officer (CFO) choose? Justify your recommendation by explaining the relationship between the offered wage, the employees' reservation wages, and the firm's hiring target.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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