What Do We Mean When We State That a Particular

question 11

Multiple Choice

What do we mean when we state that a particular principal-agent payment scheme is inefficient?

• A) The principal and agent could find another agreement that would increase the sum of the owner's revenue and the worker's payment.
• B) The agreement involves the highest level of effort for the worker.
• C) The agreement leads to the lowest level of revenue for the owner.
• D) The sum of the income taxes paid by the owner and the worker is too high.

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Definitions:

Institutional Value System

The set of fundamental beliefs, ethics, and norms that guide the behavior and practices within an organization or institution.

Exploration

Calls for the organization and its managers to stress freedom and radical thinking and therefore opens the firm to big changes—or what some call radical innovations.

Process Innovations

Introduce into operations new and better ways of doing things.

Institutional Adaptation

The process by which organizations adjust and change to meet the demands of their external environment or internal needs.