Joan, a Landscaper, Has Hired Devin to Help Maintain the Lawns

Essay

Joan, a landscaper, has hired Devin to help maintain the lawns under her care. They will be working in different locations, and Joan cannot monitor Devin's performance. If Devin works hard, Joan earns profit of $1,000 and Devin makes $100. If Devin does not work hard and Joan still pays a fixed wage, each makes $300. If Devin works hard and Joan pays him per lawn, she will earn $700 and Devin will make $200. Finally, if Devin does not work hard but Joan pays him per lawn, she makes $500 and he makes $150. Set up the game in extensive form and solve for the expected outcome of this principal-agent game.