There Are Three Big Lessons When Designing Incentive Schemes

question 80

Essay

There are three big lessons when designing incentive schemes. Which of the lessons applies to each of the following cases?
A. In the Philippines, Cebu Provincial Detention and Rehabilitation Centre, a prison, tries to instill camaraderie and comradeship, and establish physical fitness among its prisoners by teaching them dance routines, such as Michael Jackson routines, as part of their daily exercise.
B. The manager of a transportation garage for the school district bus system is told to reduce the maintenance costs for the district's bus fleet over the next three months or risk losing his job. He therefore repairs only the worst problems knowing that performing minor repairs now will save money six months down the road.
C. In Bangladesh, the Grameen Bank offers small loans to borrowers who have no collateral. The loans are offered in sequential order to small groups of borrowers. Once the first borrower has established a repayment schedule, the second borrower gets the loan, and so on. It is in the group's best interest to maintain a good loan repayment schedule so that they are eligible for bigger loans as time progresses.