Question: Question 2 : Principal - Agent Games: Adverse Selection In October 2 0 2 1 , Tesla announced an upgrade to its full self -
Question : PrincipalAgent Games: Adverse Selection
In October Tesla announced an upgrade to its "full selfdriving" feature to automate driving on highways and city streets. Because it was in beta mode, Tesla released the upgrade only to its safetyconscious owners. To qualify for the upgrade, Tesla introduced a screening mechanism called "Safety Score" that ranks one's driving on a scale from to based on factors such as hard braking, aggressive turning, and unsafe following. The goal was to release the upgrade to defensive drivers and not to aggressive drivers.
Suppose that the value of driving a Tesla with the full selfdriving upgrade is measured as generic units while the value of driving a Tesla without the upgrade is Maintaining a high Safety Score is based on natural driving abilities and effort. Suppose that the average Safety Score among all drivers is However, a defensive driver is able to achieve a higher score with less effort: it costs units of value to raise the Safetyl Score by point. Aggressive drivers, on the other hand, endure a greater cost of units to raise the Safety Score by point because aggressive drivers find defensive driving to be boring
a What is the minimum Safety Score provide a whole number that satisfies the condition that would achieve Tesla's goal of releasing the upgrade only to defensive drivers?
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