4. (15) Breach of Contract
This question runs through the various concepts associated with
breach of contract. Jack and Jill sign a contract whereby Jill must
supply Jack with his fall line of clothing, which will be displayed
in a fashion show whose date has already been set. Jack and Jill
are both risk neutral and therefore base their decisions on their
expected returns.
state
probability of state
Jack
Jill
good
0.9
20,000
10,000
bad (no breach)
0.1
20,000...