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Employee's salary is $100k unless the employee is caught shirking, in which case the salary is 0. When employee works hard, there is a cost
Employee's salary is $100k unless the employee is caught shirking, in which case the salary is 0. When employee works hard, there is a cost of effort for the employee that equals to $50k. When the employee works hard, the value of employee output for the manager is $200k. When the employee shirks, the value of employee output for the manager is $0. The cost of monitoring is $50k for the manger. (a) Draw a diagram that represents the simultaneous game. (b) Find the mixed strategy equilibrium. Explain
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