Chapter Learning Objectives

  • Recognize the distinction between hard verifiable information and soft subjective information.
  • Understand some of the primary obstacles that arise in providing proper work incentives.
  • Know the main factors that are responsible for determining the optimal forms of piece rate and commission-based payment schemes.
  • Explain why some workers receive performance-based pay and others are salaried.
  • Understand some of the difficulties that arise in the provision of incentives within teams.
  • Appreciate why the folly of rewarding A, while hoping for B has had devastating effects on real-world incentive schemes.
  • Understand both the strengths and the weaknesses of using tournaments to elicit appropriate effort levels from workers.