What fixed percentage of the profits should you offer ron

Reference no: EM13182606

You wish to hire Ron to manage your Dallas operations. The profits from the operations depend partially on how hard Ron works, as follows. Probabilities:

Profit = $10,000 Profit=$50,000

Lazy 60% 40%

Hard worker 20% 80%

If Ron is lazy, he will surf the Internet all day, and he views this as a zero cost opportunity. However, Ron would view working hard as a "personal cost" valued at $1000. What fixed percentage of the profits should you offer Ron? Assume Ron cares only about his expected payment less than any "personal cost."

Reference no: EM13182606

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