Question 1 (Please note that part a, b, and c are independent questions. Answer all parts) [Word limit: 1300] a. What do you mean by 'Information Rent' in contract design? If agents are boundedly self-interested (i.e., they have social preferences), instead of self- interested, what would happen to the volume of information rent and why? Explain with an example. [Word limit 500] b. Write a brief summary of the following paper. In the summary, you should include the main research questions, motivation, research designs, and main findings of the paper. Next explain how the findings of this paper are relevant/useful in reality by providing one real-world example [Word limit 600] Rao, G., 2019. Familiarity does not breed contempt: Generosity, discrimination, and diversity in Delhi schools. American Economic Review, 109(3), pp.774-809. c) Vedica (V) has the following utility function of wealth: u" =y4/3 Vedica is a potential international immigrant to the United States. She works out that she faces the following lottery if she tries to travel to the US to work or to become a student. She starts with wealth of $20 000. She is told that if she goes to the US, she could end up gaining additional wealth of $100 000 with probability (p) and that she could lose all of her $20 000 with probability (1 - p). Vedica believes that she will be successful with a probability of 10%. Read the following statement. Do you think the statement is true or false? Explain your answer mathematically and intuitively. As a member of the government of the state from which Vedica originates, you evaluate Vedica's case and work out that Vedica is risk-loving and you would need to compensate Vedica the equivalent of approximately $1340 for her to remain in your country and not emigrate. [Word limit: 200]