Reference no: EM13921318

Professors Brickley and Smith are writing two chapters for a new book. Two primary tasks are involved. First, someone has to write each of the chapters. Second, someone has to copyedit the chapters. The second step involves making sure that the writing is good, that there are no typographical errors, etc. They are considering two alternative ways to orga- nize the work. In one case, one of the professors would write both chapters, and the other that attract and retain qualified employees at the lowest cost. Firms sometimes can use the salary-fringe benefit mix to attract particular types of employees. For example, offering liberal insurance coverage is more likely to attract people with families than single individuals, who are more likely to prefer cash payments. Firms also have incentives to heed employee preferences when it comes to choosing the mix of fringe benefits. This incentive has motivated many firms to consider cafeteria-style benefits. Use of these plans is limited due to administrative costs and adverse-selection problems.