An online clothing sales company is looking to set up a customer
service in-house customer. Because this is the company’s only
marketing channel, it takes that those who receive telephone or
chat inquiries recreate the shopping experience in a store
physical. This is complex given the lack of personal
interaction between the customer and the seller. Without
However, the owner of the company considered that a competent
person who knows how to ‘connect’ with customers, has the potential
to generate twice the sales of the average store
clerk. The

The challenge is that this quality is not observable at first
glance. Faced with this difficulty, the owner of the company
contacted him given his experience in people management. You,
showing off what you learned in the course, carry out a detailed
study of the conditions of the labor market and the competitive
environment of the company. The analysis yields two results
main. First, you have identified that an average apparel
salesperson earns an annual salary of $ 15M.1 However, not all
salespeople have the skills soft to connect with
customers. Those that fail to connect would produce a volume
of online sales that would leave earnings of $ 10M per year to the
company that you advise. Secondly, a salesperson who does have
the ability to create a connection with the customer could generate
profits of $ 40M annually for the company that you advise. Second,
his detailed analysis of the psychology of virtual sales allowed
him to identify that the ability to connect with the client is
correlated to the degree of histrionics and extroversion of the
seller, as well as his communication skills. These
characteristics are not manifest with the naked eye, moreover, a
worker would have to spend a whole year in the firm so that it is
certain whether it possesses them or not. Because of this, he
came up with two alternatives to identify to people with these
skills. One of them is to require a validity personality test
international. Histrionic, outgoing people, and with good
communication skills

1 This can be interpreted as a market wage.

They would pass without the need to study. However, this
type of test is not infallible since a

A person without these skills could study 6 months and still
pass it. The other alternative is that, to be considered, the
applicant has a qualification Formal in theatrical
performance. In Chile, training in acting can be obtained in
schools of Acting or in universities. The time it takes to
obtain a formal qualification (title) in an Acting school depends
on the talent and personality of the student. The histrionic
people, Extroverts, and with good communication skills generally
obtain the title in 1 year, While those that do not present these
characteristics require 3 years on average. By On the other
hand, theatrical education at the university level takes 5 years
regardless of talent or the student’s personality. It should
be noted that in the third year of study, the universities grant a
certificate totally equivalent to the one awarded by acting

Another difference between acting schools and universities is
the employment opportunities associated with you add to each
one. An actor or actress with an acting school degree may work
in plays small theater, with an average annual salary of $
18M. An actor or actress with a college degree, instead, you
can work on top-tier plays, with an average salary of $ 50M.

With all this information you must determine if a signaling
mechanism is necessary and,

If so, which is the most convenient for the signature. To
do this, denote as seller type 0 those who they do not have the
competencies valued by the firm, and type 1 salesperson to those
who do. Remember that these competencies are not observable.


1) Suppose that only 25% of potential applicants are type 1. Is
it necessary to?

Implement a signaling mechanism? Fundamentally

2) Calculate the opportunity cost of each certification
alternative (personality, school performance title, and university
performance title), for each type

Seller. Hint: remember the concept of opportunity
cost. It could be found in the

Need to compare two alternatives for a certificate level and
vendor type.

3) Write in algebraic terms the incentive compatibility
constraints and

Of participation. Denote c 0 (y) the cost of a
type 0 salesperson and c 1 (y) the cost of a

Type 1 vendor, where y represents in generic form the different
alternatives — i.e. y =

1test, acting school, university. Also, consider that the
salary paid by the

Firm that you advise your sellers is ˆw. What finally
happens to the restrictions of

Participation and incentive
compatibility? Fundamentally.

4) Identify the optimal certification that would allow a
separate balance to be implemented

Rador; that is, only type 1 people apply for the position
of salesperson in the firm. For this,

Suppose the firm is willing to pay $ 35M to a Type 1 candidate
if it can identify

Carlo from the mechanism that you propose. Basically with
the numerical results of

The relevant incentive and participation compatibility

5) What would be the minimum wage that the company could offer a
type 1 seller such?

That the separating equilibrium obtained in the previous
question is maintained?

6) Suppose that the trade employees union negotiated with the
employer a salary

$ 25M annual minimum for store clerks. Can you implement a
balance separator in this new situation? Fundamentally with
numerical results of the constraints

Compatibility of relevant incentives and participation.

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