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According to Expectancy Theory, Communicating the Existence of a Performance-Based

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According to expectancy theory, communicating the existence of a performance-based reward system motivates employees by increasing their outcome valences.


Definitions:

Lerner Index

A measure of a firm's market power, calculated as the difference between price and marginal cost divided by price.

Elastic

Describes demand that is highly sensitive to changes in price, meaning that quantity demanded can significantly increase or decrease as prices change.

Average Cost

The total cost of production divided by the number of goods produced, representing the per-unit cost.

Marginal Revenue

The boosted income realized by vending one extra unit of a good or service.

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