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Burger King (BK) recently hired Riley as a restaurant manager. Riley can exert either low effort (a = 0) or high effort (a = 1).
Burger King (BK) recently hired Riley as a restaurant manager. Riley can exert either low effort (a = 0) or high effort (a = 1). The revenue of the restaurant depends not only on Riley's effort, but also on the state of the economy, in the following way: Low effort (a = 0) High effort (a = 1) Bad economy (Prob. = 0.3) $50,000 $70,000 Booming economy (Prob. = 0.7) $70,000 $100,000 Riley's utility function is U = w - C(a), where w denotes their wage income, and C(a) = 10,000a is their cost of effort. Assume that there are no costs to operating the restaurant (other than Riley's cost of effort)
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