2.1 Your firm is conducting search for a chemical engineer with 5 to 10 years of experience. Thirty-two engineers applied for the position. Preliminary screening of resumes revealed that twelve applicants appear to be qualified. All of these candidates reside out of state. Mr. Thrifty, a hiring comity member, suggested that the firm could economize on hiring costs by offering to qualified applicants to travel for an interview at their own expense. Mr. Halfway suggested that it will make sense to promise that the applicants who will be denied the job will be reimbursed for travel expenses, while, the person who is offered the job will not receive reimbursement for his travel. Which of the following statements most accurately describe your position:

Going along with Mr. Thrifty’s suggestion is strictly superior to selecting at random who among the twelve finalists will be interviewed.

b. Going along with Mr. Thrifty’s suggestion may be costly, because the individuals who will come to an interview at their own expense will be in the position to demand much higher wages than they could demand when their trip is paid for by the company.

c. Both Thrifty's and Halfway's screening mechanisms may cause adverse selection.

d. Mr. Halfway’s proposal is strictly superior to Mr. Thrifty’s suggestion.

2.2  If workers might also be screened by universities, can a firm earn profit from screening them? Under what circumstances is screening more likely to take place on the job rather than before workers enter the labor market?

2.3 What kinds of firms are most likely to aggressively sort through workers and use up-or-out career systems? Why?

2.4 How might a firm signal to potential employees about important characteristics of the job it is offering? Can you give any examples?

2.5 Can you give any examples of signaling in other business contexts? How about that you have seen in your own life? In each case, what is the cost of the signal? In what way do those who signal differ from those who do not? Does the signal meet our criteria for a separating equilibrium?