Reference no: EM131009963

The "Artificial Intelligence (AI) Corporation" has two divisions: Manufacturing and Sales. When a new worker is hired both she and her supervisor are equally ignorant about her ability. There is no skill involved in making and marketing AI robots; however, natural ability matters a great deal. An individual assigned to marketing either sells 12 AI robots a year or she sells nothing. Similarly, a production worker is either able to produce 12 robots a year or she is not able to produce any robots at all. It is known that: - everybody capable of selling robots is capable of making them - one out of four people can both sell and make robots - two out of four people are capable of making robots A probationary period under expensive managerial supervision is necessary in order to learn the individual's type. The costs associated with the probationary period in manufacturing are $ 10,000. In other words, at a cost of $ 10,000 the firm can learn if a particular worker is capable of producing robots. In order to evaluate the individual's marketing ability, a more expensive screening procedure is needed. It costs $ 30,000 to find out if a person is able to sell robots. Currently, this firm is hiring entry level workers only into manufacturing. Those who do not show themselves as able robot-makers are dismissed after probation. Some of the able robot-makers are retained in manufacturing, while others are given an opportunity to do probation in marketing. That is, they are screened for ability to sell robots, at a cost of $ 30,000 to the company. Those who fail in marketing are sent back to the robot manufacturing division. Can this policy be improved? Explain. Which of the following options best describes your answer? a) The firm will do better by hiring some of the workers directly into marketing. It makes little sense to take an able robot maker from manufacturing and send her to costly marketing probation knowing that h e will fail there with probability 1/2. b) The company will do better by firing workers who failed in marketing. c) The firm can improve its profits by hiring workers only into marketing, where their ability to sell robots is tested, and then transferring some into manufacturing. d) The firm is following the optimal screening strategy.