Discuss alternative pay schemes and labor efficiency.
Some so-called pay-for-performance or incentive pay plans have become increasingly popular throughout the world. Among others, these include:
Commission and Royalties;
Raises and Promotion;
Please explain at least five of the above plans.
Explain what is meant by the term principal-agent problem. Have you ever worked in a setting where this problem has arisen? If so, do you think that increased monitoring would have eliminated the problem? Why don’t firms simply hire more supervisors to eliminate shirking problems?