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Acompany decides whether and how to induce a manager to put in high effort to increase the chances that the project succeeds. Unfortunately, the manager's
Acompany decides whether and how to induce a manager to put in high effort to increase the chances that the project succeeds. Unfortunately, the manager's effort is unobservable. The value of a successful project is $1 million; the probability of success given high effort is 0.5: the probability of success given low effort is 0.25. The manager's utility is the square root of compensation (measured in millions of dollars}. and his disuh'lily from exerting high effort is 0.1. The reservation wage of the manager is $160,000, To induce high effort. the company should pay the manager $ in case of a successful project and $ in case ofan unsuccessful project. Hint.- write Fntergers without thousand separators
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