In the Rat Race Model, Workers Competing for a Promotion

question 16

Multiple Choice

In the rat race model, workers competing for a promotion work more hours to signal that they are willing to work long hours. What is unusual is that even those who like to work long hours end up working even longer hours. Why is this?

• A) They are more risk-adverse.
• B) They need to outdo workers who don't like long hours but are willing to work temporarily long hours to get the promotion.
• C) Their excess work is an example of moral hazard.
• D) They find that excessive work hours are enjoyable and healthy.

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Definitions:

Servicing Fee

A fee charged by a company for servicing an account, loan, or investment, covering the costs of maintaining the account or investment.

Accounting Scandals

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Agency Problem

A conflict of interest arising between principals, such as shareholders, and agents, such as company executives, due to differing goals.

Study of Finance

The discipline that concerns the management, creation, and study of money, banking, credit, investments, assets, and liabilities.