Compute the explicit incentive constraint

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Reference no: EM132178121

Question: Again, consider a similar problem to the one spelled out in but in this case the agent's effort in each period is observable. His ability remains unknown, however, for both the market and the agent. Compute the explicit incentive constraint that needs to be satisfied in order for the agent to put forth an adequate effort level. Show that implicit incentives can only be imperfect substitutes to the explicit monetary incentives obtained via a wage that is linked to performance.

Reference no: EM132178121

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