Which Incentive Scheme Would Simultaneously Elicit Accurate Information About Feasible

question 103

Multiple Choice

Which incentive scheme would simultaneously elicit accurate information about feasible plant production levels and motivate managers to perform up to potential (in the following schemes, B is the bonus payment, Q is actual plant output, and Q_f is the manager's estimate of feasible output) ?

• A) B = 0.4Q
• B) B = 0.4(Q - Q_f)
• C) B = 0.4Q_f + 0.3(Q - Q_f) if Q > Q_f
• D) B = 0.4Q_f - 0.6(Q - Q_f) if Q < Q_f
• E) B = 0.4Q_f - 0.6(Q - Q_f) if Q > Q_f

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