Exam 12: Performance Measurement and Incentives

Which of the following terms best describes a review system in which an employee's supervisor,coworkers and subordinates are all asked to provide information regarding that employee's performance over a period of time?

Which of the following factors is an effective tool for companies to use to mitigate hidden action and hidden information problems in agency relationships?

Which of the following terms best describes a review system in which an employee and a supervisor work together to construct a set of goals for that employee?

Given an employee cost of effort function (where e is given in hours worked per week and each unit of e produces an extra $100 in sales): c(e)= 0 if e<=40 (1/3)*(e-40)² if e>40 If the firm offers a salary-plus-commission job of $500 per week plus 20% of sales,what is the employee's marginal benefit of effort? How much more will the employee work than the standard 40 hour work week? What is the employee's actual salary when they work to maximize their payoff?

Given an employee cost of effort function (where e is given in hours worked per week and each unit of e produces an extra $100 in sales): c(e)= 0 if e<=40 (1/3)*(e-40)² if e>40 What is the cost of effort for a 37 hour week? What is the cost of effort for a 43 hour week? If the firm offers a salary only job of $500 per week,what is the employee's payoff net of effort costs for a 49 hour work week?

Which of the following is not a characteristic of performance based pay?

Which of the following terms best describes a piece of information on which an incentive contract (explicit or implicit)can be based?

Which of the following is a tool a firm can use to combat agency problems?

What term best describes the payment which must be offered to a risk-averse individual to willingly accept a gamble?

Which of the terms best describes the effect that results from supervisors giving all their subordinates average (or above average)grading to avoid making sharp distinctions between those subordinates when evaluating them?

Which of the following terms describes a contract based on information that cannot be observed by courts or arbitrators?

What term best describes an agent who is indifferent between a sure thing and a gamble of equal expected value?

Given an employee cost of effort function (where e is given in hours worked per week and each unit of e produces an extra $100 in sales): c(e)= 0 if e<=40 (1/3)*(e-40)² if e>40 If the firm offers a salary-plus-commission job of $400 per week (instead of $500)plus 20% of sales,at what effort level does the employee maximize their payoff?

What is a benefit of the de-centralized organization coordination solution?

What type of performance measurement based process was used to determine Jack Welch's successor,Jeffrey Immelt,as CEO of GE?

Given an employee cost of effort function (where e is given in hours worked per week and each unit of e produces an extra $100 in sales): c(e)= 0 if e<=40 (1/3)*(e-40)² if e>40 If the firm offers a salary-plus-commission job of $500 per week plus 20% of sales,how can we write the employee's payoff function? What is the employee's total compensation for working a 46 hour workweek (Note: This is the compensation and not payoff net of effort costs)?

How does a centralized organization solve coordination problems?

Which of the following terms best describes a contract that guarantees an agent some payment,but provides enough incentive so that the agent does not shirk?

Which of the following terms describes a contract by which the value of the compensation depends on the measured performance of the employee?

What is a key factor in determining how a firm resolves coordination problems?