EC372

EC372: ECONOMICS OF FINANCIAL MARKETS Takehome assignment: 1. [30 marks] An entrepreneur has the following technology: if she invests £1 the technology yields £A with probability q and nothing (0) with probability 1 - q. Theprobability q of success depends on the unobservable level of effort exerted by theborrow £1 from a bank. ( ) = 2 entrepreneur. Effort is costly: to induce a probability q of success the entrepreneurincurs a disutility cost o

22 Other / Other Other / EC372 17 Nov 2020