Problem 1. A risk-neutral principal interacts with an agent with utility-of-wealth function u()- var. The agent can choose two possible effort levels: eL and eH. The utility cost of choosing ?? is 1, and the utility cost of choosing e is 0. The agent has an outside option worth 1. The project on which the agent works has two possible outcomes: a high outcome 11 worth 12 to the principal, and a low outcome xl worth 4. The following table contains the conditional distributions over outcomes given effort: Pre e) eL 0.25 0.75 eH 0.50.5 3. Suppose now the agent is risk neutral with utility function u(u), but the principal is risk-averse. The optimal contract the principal offers the agent: (a) Implements effort ell with a variable wage 16 when ::11 and 0 when x = (b) Implements effort eu with constant wage 4. (c) Implements effort ?? with a variable wage 6 when x- and-2 when x-zL. (d) Implements effort ei, at constant wage 1. Problem 1. A risk-neutral principal interacts with an agent with utility-of-wealth function u()- var. The agent can choose two possible effort levels: eL and eH. The utility cost of choosing ?? is 1, and the utility cost of choosing e is 0. The agent has an outside option worth 1. The project on which the agent works has two possible outcomes: a high outcome 11 worth 12 to the principal, and a low outcome xl worth 4. The following table contains the conditional distributions over outcomes given effort: Pre e) eL 0.25 0.75 eH 0.50.5 3. Suppose now the agent is risk neutral with utility function u(u), but the principal is risk-averse. The optimal contract the principal offers the agent: (a) Implements effort ell with a variable wage 16 when ::11 and 0 when x = (b) Implements effort eu with constant wage 4. (c) Implements effort ?? with a variable wage 6 when x- and-2 when x-zL. (d) Implements effort ei, at constant wage 1