3. You wish to hire Ricky to manage your Dallas oper- ations. The profits from the operations depend par- tially on how hard Ricky works, as follows.

If Ricky is lazy, he will surf the Internet all day, and he views this as a zero cost opportunity. However, Ricky would view working hard as a "personal cost"
valued at SIOUO. What fixed percentage of the prof-
its should you Offer Ricky" Assume Ricky only cares about his expected payment less any "personal

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Probabilities Profit= Profit= $10,000 $50,000 Lazy 60% 40% Hard worker 20% 80%