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Question 1 (12 marks) You wish to hire Ricky to manage your Dallas operations. The profits from the operations depend partially on how hard Ricky
Question 1 (12 marks) You wish to hire Ricky to manage your Dallas operations. The profits from the operations depend partially on how hard Ricky works, as follows: Probabilities Profit = = $10,000 Profit = $50,000 Lazy Worker Hard Worker 60% 20% 40% 80% If Ricky is lazy, he will surf the Internet all day, and he views this as a zero-cost opportunity. However, Ricky would view working hard as a personal cost valued at $1,000. Assume Ricky only cares about his expected payment less any personal cost. (a) What fixed percentage of the profits should you offer Ricky? (Show your steps!) (10 marks) (b) What type of information problem the above situation will refer to? (2 marks)
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