You wish to hire Melissa to manage your Kansas operations. The profits from the operations depend partially on how hard Melissa works, as follows:

If Melissa is lazy, she will surf the Internet all day, and she views this as a zero cost opportunity. However, Melissa would view working hard as a "personal cost" valued at $2,000. What fixed-percentage of the profits should you offer Melissa? Assume Melissa only cares about her expected payment less any "personal cost."

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Lazy Worker Hard Worker Probabilities Profit= $20,000 65% 30% Profit= $100,000 35% 70%