12. interacting control problems Return to the setting immediately above, and concentrate on the first case where two type one tasks are assigned to a single manager. But now suppose the manager can delay choice between H and L for the second task until the output from the first task is observed.

(a) Using the earlier determined pay-for-performance arrangement, can the manager be counted on to supply input H to the second task?

(b) Find an optimal pay-for-performance arrangement for this situation where the manager observes the first task’s output before supplying input to the second task. Explain the difference between your arrangement and that determined in the original setting.