Changes

* [http://www.edegan.com/wiki/index.php/Holmstrom_%281999%29_-_The_Firm_As_A_Subeconomy Holmstrom (1999), Firm as Subeconomy], Not on 2010 exam's reading list.

<b>Notes about assumptions</b>:

If some shares can be different, then the optimal contract is where some number <math>M<N</math> workers get <math>s_{i}=\frac{1}{z}</math>, and the remainder get <math>s_{i}=0</math>. <math>M</math> is the largest number such that <math>\frac{M}{Z}\leq 1</math>. <math>M</math> workers will provide effort, and <math>N-M</math> workers will shirk.

In the previous scenario, the CEO got <math>M</math> workers to work. The question now is whether burning some of the output <math>V</math> will motivate the remaining <math>N-M</math>

Reminder: CARA utility is <math>u(c)=1-e^{-\rho c}</math>