9. valuable private information Return to Example 17.5. Suppose no information is available, and the firm desires
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9. valuable private information Return to Example 17.5. Suppose no information is available, and the firm desires supply of input H. Determine an optimal pay-forperformance arrangement, and contrast it with the case where the information is privately obtained by the manager but not communicated.
How much would the firm pay for the manager to observe the environment before acting? Does this amount depend on whether communication is feasible? Why?
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