Question: You are negotiating a contingent contract with a new potential employee in your widget factory. Your potential employee is going to either exert high or

You are negotiating a contingent contract with a new potential employee in your widget factory. Your potential employee is going to either exert high or low effort on the job. If the employee exerts high effort they pay a cost of 10, while if they exert low effort, they pay a cost of 0. The agent's next best alternative to working for you gives a payoff of 5

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