Ku owns a company and wants sales to increase. She implements a bonus pay system for the sales team at her company where workers receive extra compensation for sales beyond a set minimum expectation. This is an example of solving a moral hazard problem by
A)providing complements to support the actions you want.
B)making hidden activities observable.
C)using social norms to align incentives.
D)giving people a stake in the outcome.

Question

Quizplus · Accepted Answer

By implementing a bonus pay system, Ku is giving her sales team a direct stake in the outcome of their sales efforts, aligning their incentives with the company's goal of increasing sales. This approach motivates the team to work harder and achieve better results, as their personal gain is directly tied to their performance.

Ku Owns a Company and Wants Sales to Increase