A state government hired a contractor for a road-construction project. The contractor's type, its cost efficienciency, is unknown to the government. There is 2/3 probability of the its construction cost being 3 (billion dollars per lane) and 1/3 probability of the cost being 5. More lanes yield more social benefit in the form of faster travel and fewer accidents. The social value V (measured in billions of dollars) from having N lanes on the highway is: V-15N-N?2. The government is interested in choose N and writing a contract to maximize the benefit to the state (V) net of the fee paid to the contractor (call it F): G-V-F. Your goal as a government official is to design a pair of contracts to separate the types of contractor. You want the contractor to choose "Contract L: Build N lanes and get paid RL dollars" if its cost type is low cost of $3 (billion dollars per lane) and to choose "Contract H: Build NH lanes and get paid RH dollars" if its cost type is high cost $5 (billion dollars per lane). Your analysis concludes that the optimal contract is "Contract L: Build lanes and get paid billion dollars" and "Contract H: Build lanes and get paid billion dollars."

A state government hired a contractor for a road-construction project. The contractor's type, its cost efficienciency, is unknown to the government. There is 2/3 probability of the its construction cost being 3 (billion dollars per lane) and 1/3 probability of the cost being 5. More lanes yield more social benefit in the form of faster travel and fewer accidents. The social value V (measured in billions of dollars) from having N lanes on the highway is: V-15N-N?2. The government is interested in choose N and writing a contract to maximize the benefit to the state (V) net of the fee paid to the contractor (call it F): G-V-F. Your goal as a government official is to design a pair of contracts to separate the types of contractor. You want the contractor to choose "Contract L: Build N lanes and get paid RL dollars" if its cost type is low cost of $3 (billion dollars per lane) and to choose "Contract H: Build NH lanes and get paid RH dollars" if its cost type is high cost $5 (billion dollars per lane). Your analysis concludes that the optimal contract is "Contract L: Build lanes and get paid billion dollars" and "Contract H: Build lanes and get paid billion dollars."

Name: A state government hired a contractor for a road-construction project
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Description: A state government hired a contractor for a road-construction project. The contractor's type, its cost efficienciency, is unknown tothe government. There is 2/3 probability of the its construction cost being 3 (billion dollars per lane) and 1/3 prob

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Concept explainers

Contingency Table

A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.

Binomial Distribution

Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.

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Question

A state government hired a contractor for a road-construction project. The contractor's type, its cost efficienciency, is unknown to
the government. There is 2/3 probability of the its construction cost being 3 (billion dollars per lane) and 1/3 probability of the cost
being 5. More lanes yield more social benefit in the form of faster travel and fewer accidents. The social value V (measured in billions
of dollars) from having N lanes on the highway is: V-15N-N?/2. The government is interested in choose N and writing a contract to
maximize the benefit to the state (V) net of the fee paid to the contractor (call it F); G-V-F. Your goal as a government official is to
design a pair of contracts to separate the types of contractor. You want the contractor to choose "Contract L: Build N lanes and get
paid RL dollars" if its cost type is low cost of $3 (billion dollars per lane) and to choose "Contract H: Build NH lanes and get paid RH
dollars" if its cost type is high cost $5 (billion dollars per lane). Your analysis concludes that the optimal contract is "Contract L: Build
lanes and get paid
billion dollars" and "Contract H: Build
lanes and get paid
billion dollars."

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