Holmstrom’s example. Let u x y(x); f(x, a) (1/a) exp(x/a); V 2y1/ 2 a. Does an increase in a lead to a stochastically dominant distribution? Does f(x, a) satisfy CDFC and MLRC? Find the first- and...

Holmstrom’s example. Let u x y(x); f(x, a) (1/a) exp(x/a); V 2y1/ 2 a. Does an increase in a lead to a stochastically dominant distribution? Does f(x, a) satisfy CDFC and MLRC? Find the first- and second-best optimal payment functions and compare them.