A widget producer is deciding whether to compensate widget makers on a salary basis or a per unit basis.Given that it is difficult to monitor shirking,which of these pay schedules would provide stronger performance incentives?
A)Per piece compensation
B)Salary
C)Both of them
D)Neither of them

Question

A widget producer is deciding whether to compensate widget makers on a salary basis or a per unit basis.Given that it is difficult to monitor shirking,which of these pay schedules would provide stronger performance incentives?​
A)​Per piece compensation
B)Salary
C)Both of them
D)​Neither of them

Quizplus · Accepted Answer

Per piece compensation provides stronger performance incentives because the widget makers are directly incentivized to produce as many widgets as possible in order to increase their earnings. With a salary, widget makers may not feel as motivated to work as efficiently or productively since they will receive the same pay regardless of how much they produce. Additionally, since it is difficult to monitor shirking, per piece compensation allows the management to ensure that the workers are working as hard as possible in order to maximize their earnings.

A Widget Producer Is Deciding Whether to Compensate Widget Makers