Scenario 22-2
A wireless telephone service provider offers three service plans to its consumers.
-Refer to Scenario 22-2. By offering consumers these choices, the wireless telephone provider is
A)signaling to customers that they offer great customer service.
B)screening customers to reveal how much they plan to use the service.
C)creating asymmetric information because only the firm knows the true cost of the service.
D)engaging in a principal-agent problem

Question

Scenario 22-2
A wireless telephone service provider offers three service plans to its consumers. 
-Refer to Scenario 22-2. By offering consumers these choices, the wireless telephone provider is
A)signaling to customers that they offer great customer service. 
B)screening customers to reveal how much they plan to use the service. 
C)creating asymmetric information because only the firm knows the true cost of the service. 
D)engaging in a principal-agent problem

Quizplus · Accepted Answer

By offering different service plans, the wireless telephone service provider is screening customers to reveal how much they plan to use the service. This allows the provider to price the plans differently based on usage, which can help them maximize their profits. However, this also creates an asymmetric information problem because only the firm knows the true cost of providing the service, and customers may not be fully informed about their options.

Scenario 22-2 a Wireless Telephone Service Provider Offers Three Service Plans to Plans