Discuss the below:
Q: Suppose an agent has two feasible actions, A = {y1; y2} and A0 = {z1; z2}; the corresponding probabili-ties are defined by the matrix
p 1 - p
P =
1 - p p
where 1/2 p ≤ 1. The costs incurred by choosing the first and the second actions constitute c1 and c2, respectively (c2 ≥ c1). The expected income of the principal gained by the first (second) action makes H1 (H2, respectively). Evaluate an optimal contract.