Assume again that you are the manager of an electro domestic store. The store can have weak demand, with a probability of 0.3, and strong demand, with a probability of 0.7. Moreover, the store's profit will depend on your effort, as shown in the following table. From your perspective, each effort level comes with a cost. This cost is 2 for low effort, 10 for medium, and 32 for high. Both you and the owner are risk neutral.

	Weak Demand	Strong Demand
Low Effort	50	70
Medium Effort	70	110
High Effort	100	140

Calculations on excel (1-3)

1. Fill in the expected payoffs to both parties if you are compensated with a fixed salary of 30. Which effort level would you choose?
2. Fill in the expected payoffs to both parties if you are compensated with a profit-sharing contract providing her with 50% of the profits (and the owner gets the other 50%). Which effort level do you choose?
3. Now, suppose that your contract provides you with a base salary of 30 and 100% of any profits exceeding 100. Which effort level does she choose?

4 . Which of the two contracts in parts a., b., and c. would you prefer? Which would the owner prefer?