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Principal Agent Problem Consider the following information: Income to the rm from workers who sell doorto-door Bad Luck Good Luck Low Effort (e=0) $10,000 $14,000

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Principal Agent Problem Consider the following information: Income to the rm from workers who sell doorto-door Bad Luck Good Luck Low Effort (e=0) $10,000 $14,000 High Effort (e=1) $14,000 $26,000 Cost of effort: (I = 10, 000 6 Probabilities: Bad luck = 0.75; Good luck = 0.25

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