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1) Your firm is hiring a software developer for a project that you expect to make 200.000 in revenue for you. However, the success of

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1) Your firm is hiring a software developer for a project that you expect to make 200.000 in revenue for you. However, the success of the project is not certain, and is dependent on the level of effort put forth by the developer Ik the developer works hard, the probability success is 751. It the developer takes it easy, the easy, the probability of success is 50%. The developer values the disutility of hard Work at 20000 and the disutility or easy work at o There are other jobs the developer could take that require no effort and pay 100000 OK a suppose a. you are considering offering the worker with this componsation pack age ? of 80000. What is your expected profit You have also conswering an alternative compingation "successful project. In order to encourage the worker to work hard, what is the incentive constraint you would after the workert In order to encourage the worker to take the work hard, what would be an effective participation constraint? sompatibility o What will be the total compensation paid to the worker that will satisfy The incentive compatibility constrains and the participation constraint ? e) What are the Firm's expected profits under this salary plus bonus compensation scheme which compensation package should you offer the base salary of 80,000 the salary plus bonus compensation package ? OV

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