A risk neutral principal contracts an agent to complete a specific task. To complete the task, the agent can exert a high or a low effort (eH or eL respectively). The effort is verifiable and thus contractible. The payoff from this task, which is gathered by the principal, can either be high or low (XH or XL respectively) and is subject to uncertainty. The table below gives the probability of achieving each possible payoff for both possible efforts XH=6000 XL=4000 eH=16 p 1-p eL=14 0.5 0.5 The variable p in the table above is a probability greater than 0.5. The principal gives the agent a wage w for his work. Let WH be the wage paid when XH is realized and WL the wage paid when XL is realized. The agent receives an overall utility given by U(w,e)= square root w -2e where e is either eH or eL. The agent's reservation utility is equal to zero.

In blanks #1 and #2 enter the values for WH and WL implementing the high effort. (No comma in the numbers)

In blanks #3 and #4 enter the values for WH and WL implementing the low effort. (No comma in the numbers)

In blank #5, enter the value for p that would make the principal indifferent between the two effort levels. (Enter a decimal number such as 0.6 or 0.56, rounding up, if necessary, to no more than 2 decimals.)