manager's opportunity eost Retum to the last lOW in Table 18.2, where the optimal pay-for-performance arrangement is displayed. The underIying data (in Table 18.1) assume M = 3,000.

Locate an optimal contract for the following cases: (i) M = 2,500; (ii) M = 2,000;

(iii) M = 1,000; and (iv) M = O. Carefully explain the emerging pattem.

AppendixLO1