Find the optimal contract for the firm to offer to the manager when the outcomeL=120, outcomeH=300.

Find the optimal contract for the firm to offer to the manager when the outcomeL=130, outcomeH=150.

Question 8 [25 marks] Suppose there is a risk-neutral firm considering hiring a manager for a project. The manager can either exert a low effort, eL, with associated disutility 902;) = 2, or a high effort, eg, with associated disutility g(eH) = 4. The manager's effort is not observable to the firm and her reservation utility is 21 = 10. A wage of it: gives a utility of char) = m for the manager. The project has outcome H if the project is successful and in, if the project is unsuccessful. The probability of success conditional on effort is given by f(?TH | eL) = 2/5 and f(?TH | 83) = 3/5. Find the optimal contract for the firm to offer to the manager when (i) m, = 120, g = 300 and when (ii) in, = 1303;; = 150