The expected profit of your firm is 1,000, plus 500 if the manager works hard. The manager receives.

The expected profit of your firm is 1,000, plus 500 if the manager works hard. The manager receives a flat salary of 100 plus a portion x of any profit in excess of 1,300. The manager s utility function is EU = [(compensation)0.5] if she does not work hard EU = [(compensation)0.5 − 1] if she works hard What portion x must be paid to the manager to ensure that she chooses to work hard? This new compensation package must be competitive with the 100 fl at salary.

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