You are deciding how to compensate and evaluate two overseas plant managers. There are two overseas plants: (1) Guam and (2) Sri Lanka. The plant revenues depend on (1) the labor market conditions in the country, and (2) the plant manager's effort choice. The relationship between effort and labor market conditions for both plants are shown in Table One. Table One Plant Revenues Labor Market Conditions Effort Cooperative Restless Rebellious High $100,000 $100,000 $40,000 Modest $100,000 $40,000 $40,000 However, as shown in Table Two, the probability of the various labor market conditions is different in the two countries. Table Two Labor Market Condition Probabilities Cooperative Restless Rebellious Guam 33.33% 33.33% 33.33% Sri Lanka 5.00% 90.00% 5.00% You can provide the manager an incentive to provide "high" effort with an objectively or subjectively measured bonus. The objective plan provides the plant manager with a bonus based on the plant revenues which you of course observe at no cost. The subjectively measured bonus rewards the manager for high effort on an assessment of the plant manager's effort made by a superior that periodically travels to the plant at some cost to the company to observe the manager's actions and the labor market