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Transaction volume and self-selection

Pelican Point financial group's clientele consists of two types of investors. The first type of investor makes many transactions in a given year and has a net worth of over $1 million. These investors seek unlimited access to investments consultants and are willing to pay up to $10,000 annually for no fee based transactions, or alternatively, $25 per trade. The other type of investor also has a net worth of over $1 million but makes few transactions each year and therefore are willing to pay $100 per trade. As a manager of Pelican point Financial Group, you are unable to determine whether any given individual is a high or low volume transaction investor. Design a self selection mechanism that permits you to identify each type of investor.

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Self-selection describes a process whereby people separate themselves into different classes in response to a choice offered to them. Self-selection mechanisms allow companies to separate their ...

Solution Summary

Self-selection of investors to maximize transaction profits.