step I. step 2. step 3. step 4. Question 3 In this problem, we will consider a multitasking problem where the principal can only incentivize the agent on one task, but where there is a \"crowdingin" e'ect: the agent's etfort in one task reduces the agent's marginal cost of effort in the other task. There are two tasks {task i and task 2]. The principal benets from the agent's elfort in both tasks: 1'? = x1 + x2 r where x1 = e] and x2 2 2. The agent has payoff function u = T are? + e; elez}. {Note that the agent may choose negative effort levels, potentially resulting in negative output.) The principal cannot reward the agent for total output; instead, he can only reward the agent for his performance in the rst task. That is, the principal can offer the agent an incentive scheme of the form m: a + by, where y : x]. The timing is as usual: Principal offers agent an incentive scheme T = a + by. Agent may accept or reject the offer. If he rejects, he receives an outside option of zero. If agent accepts, then he chooses e] and 82. Principal pays agent 1' : a + by. We'll go through the problem stepbystep. For step 3, given the principal's offer ('1' = a + by), write down the agent's maximization problem, and calculate his payoffmaximizing effort choices 3] and 32 as a function of a and b