Kombushya is known for its handcrafted drinks that come in uniquely shaped bottles. It sells its drinks exclusively on-line. It has a team of 3 workers who place bottles of drink in specially designed containers for shipping to customers. An average worker can pack about 250 bottles per day. Kombushya wants to ensure that workers are working at maximum efficiency but still placing the bottles into the cartons carefully, because they break easily.

It is considering the following incentive scheme: paying workers a fixed salary of $500 per day.

What would Agency Theory suggest about the impact of this incentive scheme?

Question

Kombushya is known for its handcrafted drinks that come in uniquely shaped bottles. It sells its drinks exclusively on-line. It has a team of 3 workers who place bottles of drink in specially designed containers for shipping to customers. An average worker can pack about 250 bottles per day. Kombushya wants to ensure that workers are working at maximum efficiency but still placing the bottles into the cartons carefully, because they break easily. 
   
 It is considering the following incentive scheme:  paying workers a fixed salary of $500 per day. 
   
 What would  Agency Theory  suggest about the impact of this incentive scheme?

Answer

Workers will work as hard as possible because $500 is quite a lot to be paid per day

Answer

Workers will be more intrinsically motivated because they can work together and everyone gets treated the same way

Answer

Workers will be motivated by self-interest, and won’t work harder or more carefully because they are paid the same amount regardless of performance

Answer

Workers will want to make goal congruent decisions and will work hard even if the principal isn’t watching them all the time

Crowdly

Kombushya is known for its handcrafted drinks that come in uniquely shaped bottl...

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