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Krepsproblems

# Krepsproblems - Income if Premium Benefit Probability of...

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Problem 18.1F from Kreps Utility of policies Utility if Utility if Income if Income if Premium Benefit Probability of getting job job no job job no job 0.5 0.6 0.7 0.8 0.9 50000-PremiumBenefit-Premium Policy A 254.95 254.95 254.95 254.95 254.95 254.95 254.95 25000 25000 25000 50000 Policy B 254.87 262.72 270.57 278.41 286.26 294.11 215.64 46500 6500 3500 10000 Policy C 251.44 260.99 270.53 280.08 289.62 299.17 203.72 49500 1500 500 2000 Policy D 250.21 260.16 270.11 280.06 290.01 299.97 200.45 49980 180 20 200 No Ins 250.00 260.00 270.00 280.00 290.00 300.00 200.00 50000 0 0 0 Best ChoicePolicy A Policy B Policy B Policy C Policy D Revenue 2500000 350000 350000 50000 2000 Costs= 2500000 400000 300000 40000 2000 Profits are 0 on A, B, and D c Profits are 10,000 on C Utility of policies Utility if Utility if Income if

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Unformatted text preview: Income if Premium Benefit Probability of getting job job no job job no job 0.5 0.6 0.7 0.8 0.9 50000-PremiumBenefit-Premium Policy A 25000 50000 Policy B 3500 10000 Policy C 500 2000 Policy D 20 200 No Ins Kreps Chapter 19: Spreadsheet for Analyzing Incentive Contracts Base wage \$9,500 Bonus \$15,000 utility if sale 156.52475842 utility if no sale 97.467943448 Prob Expected Expected Effort Choice Disutility Sale Utility Profit loafing 0.05 100.42 (\$7,250) tries, not hard 10 0.25 102.23 \$1,750 works hard 20 0.4 101.09 \$8,500 kills self 40 0.5 87.00 \$13,000 reserv. Utiliity 100...
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Krepsproblems - Income if Premium Benefit Probability of...

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