7. designer informativeness Consider yet another variation on Examples 16.1 through 16.4, where everything remains as specified except the probabilities. The probabilities are specified below. Determine a value for π(y = g|H) = α

such that (1) the monitor is useless and not controllable, (2) useful and allows zero risk premium, (3) useful and implies observing y = g is "good" news and (4) useful and implies observing y = g is "bad"

news. Verify each of your claims by solving for the associated optimal contract.

x1/g x2/g x1/b x2/b

π(x, y|H) .2α .8α .2(1 − α) .8(1 − α)

π(x, y|L) .45 .05 .45 .05