2. Ainu and Beatriu are savers who each have $100 to lend to Somerset Corp. Ainu and Beatriu, however, can determine Som

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2. Ainu and Beatriu are savers who each have $100 to lend to
Somerset Corp. Ainu and Beatriu, however, can determine Somerset’s
project only by doing research. The cost of research is $8, and
lenders cannot cooperate to share the cost of research. Ainu and
Beatriu know that half of firms have the safe project and half the
risky (inefficient) project. A safe project is risk free and costs
$200 and is guaranteed to deliver $230. The full surplus from the
project accrues to the lenders. The risk-free rate is 5 percent.
Assume that everyone is risk neutral and that each saver can
observe how the other lends.