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===Question B1: Work in Teams===
There are N employees at Yahoo. Employees can either work, <math>e = 1</math>, or shirk, e=0. It costs a worker 1 dollar to work and zero dollars to shirk. Working or not cannot be monitored by the firm. For each unit of work, the firm earns z dollars where 1 < z < N. All workers have an outside option of working at Wendy's across the street and earning zero. Work/shirk decisions are made simultaneously.
1. Suppose that Yahoo is run as a commune. In that case, each worker i is awarded a share si <math>s_i > 0 </math> of the profits where <math>∑ si = 1</math>. How much work will get done at Yahoo under the optimal communal scheme?
2. Carol Bartz, CEO of Yahoo, decides that the commune strategy isn't work- ing. She (credibly) threatens to burn some of Yahoo's profits if performance targets are not met. Derive an optimal scheme. (Assume everyone is risk- neutral and pick your favorite equilibrium.) Is this really any better than the commune arrangement?
