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FIGURE 15.4 Sorting Managers with Linear Share Contracts More risk averse Is В. 96 70 Less risk averse E •D Commercial construction loan officer Venture capital personal banker A 0.1% +0.2% +0.3% +0.4% +$12(000) ±$24(000) Profit-sharing rate Base salary (thousands of dollars)

FIGURE 15.4 Sorting Managers with Linear Share Contracts More risk averse Is В. 96 70 Less risk averse E •D Commercial construction loan officer Venture capital personal banker A 0.1% +0.2% +0.3% +0.4% +$12(000) ±$24(000) Profit-sharing rate Base salary (thousands of dollars)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Explain how the optimal incentives contract would differ if the less risk-averse bank officer (Dashing in Figure) had generated the smaller expected profit (i.e., the lower hill-shaped curve).

FIGURE 15.4 Sorting Managers with Linear Share Contracts More risk averse Is В. 96 70 Less risk averse E •D Commercial construction loan officer Venture capital personal banker A 0.1% +0.2% +0.3% +0.4% +$12(000) ±$24(000) Profit-sharing rate Base salary (thousands of dollars)
Transcribed Image Text:FIGURE 15.4 Sorting Managers with Linear Share Contracts More risk averse Is В. 96 70 Less risk averse E •D Commercial construction loan officer Venture capital personal banker A 0.1% +0.2% +0.3% +0.4% +$12(000) ±$24(000) Profit-sharing rate Base salary (thousands of dollars)
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