6. In Lower Slobobia all electricity is provided by a publicly-owned enterprise. The manager of the firm is concerned only about the present discounted value of his income. In particular, the manager is nor the residual claimant for the firm's profit. The manager in each period is paid a base salary Y large enough to put food on his table for his 16 children, and an incentive component A. Y is constant but A, changes according to the compensation formula A, = (1, - 1,-1) + x,(p, - P=) where a is profit and the second component is the quantity-weighted output price change. Y is taken to be part of production cost, but A, is paid "off the books" as a subsidy. a) Discuss the incentives this gives the manager. What will output and prices be after one period? In the limit? b) How does the manager's discount rate affect the outcome? c) Is this mechanism related to any others you are familiar with in the literature? d) Modify the incentive component to B,=X(P, - P) - D.I(1,