[raming In note 25 we reformulated the problem of locating a best pay-for-performance arrangement to focus on the manager's utility, as opposed to pay, as the choice variable. Since the manager's preferences were measured by expected utility, this allowed us to write the constraints as linear inequalities. The final step was to suggest transforming the objective to maximization of (-V l)"l( -V 2)"9. Justify this last step in terms of the first principle of consistent framing, as developed in Chapter 11.

AppendixLO1