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Economics A risk-averse employer is looking to hire a risk-neutral worker. The employer's output, denoted Q depends on the worker's effort E, which has a
Economics A risk-averse employer is looking to hire a risk-neutral worker. The employer's output, denoted Q depends on the worker's effort E, which has a dis-utility c(E) = k E, k > 0. Output can take two possible values: Q1 with probability F(E) and Q2 with probability 1 - F(E), where Q2 O and F" O and U" 0. 15 marks] Write down the expected utility of the employer and the worker assuming the employer pays W1 if output is high, and W2 if output is low
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