Question
Leo runs your shop in NJ. When Leo chooses the Socially Efficient level of effort and no unexpected factors alter his sales, he reliably generates
Leo runs your shop in NJ. When Leo chooses the Socially Efficient level of effort and no unexpected factors alter his sales, he reliably generates $1200 of sales each day. But two factors impact Leo's sales. In the spring, their is a new phone launch of a competitor, and people start buying that, and Leo's sales fall by $1000 per day compared to their usual amount, even if he chooses the Socially Efficient level of effort. But in fall, the competitor's phone hype decreases, Leo's sales increase by $1000 compared to his usual amount, even if he chooses the Socially Efficient level of effort. Other than that, his sales return to their usual level. In this case, please discuss how your contact may or may not encourage Leo to choose the Socially Efficient level of effort: (i) in the spring and (ii) in the fall.
please relate asnwer to risk-neutrality
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