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(b) If some shares can be different, then the optimal contract is where some number $M<N$ workers get $s_{i>My answer}=\frac{1}{z}$, assuming and the remainder get $s_{i}=0$. $M$ is the largest number such that all shares must be equal</i>$\frac{M}{Z}\leq 1$. $M$ workers will provide effort, and $N-M$ workers will shirk.
BPP Field Exam 2010 Answers (view source)
Revision as of 18:48, 28 March 2011
, 18:48, 28 March 2011no edit summary
<b>Note</b> that not everyone can have <math>s_{i}>\frac{1}{z}</math> because <math>\frac{N}{z}>1</math>.
(a) <i>My answer, assuming that some all shares can must be differentequal</i>.
If all shares must be equal, no contract scheme can get any of the workers to work. This is because a worker will only work if <math>s_{i}>\frac{1}{z}</math>, but we know that not everyone can have this contract because <math>\frac{N}{z}>1</math>.
(b) <i>My answer, assuming that some shares can be different</i>.
<b>Question B1.2</b>
