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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

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 = $15,000 Profit = $60,000
Lazy Worker 65% 35%
Hard Worker 15% 85%
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 $1,500. What fixed-percentage of the
profits to 2 decimal places should you offer Ricky?
Assume Ricky only cares about his expected payment less any personal cost.

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