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You have invented SnoreMore, a new pill which increases both the frequency and volume of snoring. If your product launch is successful, you can take
You have invented SnoreMore, a new pill which increases both the frequency and volume of snoring. If your product launch is successful, you can take over the $600,000 market currently controlled by Date-Be-Gone-Spray. An unsuccessful launch results in profits of $0. You consider hiring an advertising agency. The agency can either work hard or "soft" on your account. Hard work requires the agency to invest $400,000 in resources, and soft work requires an investment of $200,000. Hard work results in a chance of success and soft work results in a chance You can only observe the success or failure of the project. The advertising agency is risk-neutral. What is the optimal combination of base salary and bonus to offer the agency? Assume that the base salary cannot be negative
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