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Soft Selling Adverse selection

Soft Selling Adverse selection question

Soft selling occurs when a buyer is skeptical of the quality or usefulness of a product or service. For example, suppose you're trying to sell a company a new accounting system that will reduce costs by 10%. Instead of asking for a 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.

Chapter 16 of Book:
Managerial Economics: A Problem Solving Approach
Authors: Luke M. Froeb and Brian T. McCann

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There are two ways in which there is information asymmetry. On the one hand, the client doesn't know whether it will in fact reduce costs by 10% but the seller might know. On the other hand, once the ...

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Answer the following question.

Soft selling occurs when a buyer is skeptical of the quality or usefulness of a product or service. For example, suppose you're trying to sell a company a new accounting system that will reduce costs by 10%. Instead of asking for a 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.

Chapter 16 of Book:
Managerial Economics: A Problem Solving Approach
Authors: Luke M. Froeb and Brian T. McCann

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