Hiring workers
An employer needs to attract a high skilled worker but does not wish to spend time and money on recruitment processes. She selects the first worker who can prove they were employed throughout the last five years. The employer believes that a high skilled worker has a 90% chance to have a job in any given year; a low skilled worker is believed to have a 50% chance to have a job in any given year. Further, the employer believes that 70% of all applicants are low skilled workers; the remainder are high
skilled. Finally, assume there are 10,000 applicants.
a) What is the probability that the employer will hire a high skilled worker?
b) Argue why that probability will be very similar if the employer believes in the 'hot-hand' effect?