You own a restaurant that you dont want to run yourself. You plan to hire a manager and move to the beach yourself. Therefore you can only observe the financial results (profit) of the restaurant, bit not how hard the manager works. If he works hard, the chance that the restaurant makes $20,000 profit (before the managers salary is paid) is 85% and the chance the profit is $10,000 is 15%. If he is lazy the chance that the profit is $20,000 profit is 20% and the chance the profit is $10,000 is 80%. The manager is risk averse and his utility of income and effort is U = Y^1/2 A, where A is the effort level (10 if hard working or 0 if lazy) and Y is the monthly income. Also your manager has an alternative job offer that pays him 6400

What are the incentive compatibility constraint and the participation constraint for the manager?

For which minimum salary structure (Yhigh if profit is high, Ylow if profit is low) would he work with hard effort?

Is it profitable for you to implement this pay structure or should you just pay him the reservation wage of 6400 and let him be lazy?

HINT: This question combines uncertainty and asymmetric information.