Which incentive scheme would simultaneously elicit accurate information about feasible plant production levels and motivate managers to perform up to potential (in the following schemes, B is the bonus payment, Q is actual plant output, and Q_f is the manager's estimate of feasible output)? A) B = 0.4Q B) B = 0.4(Q - Q_f) C) B = 0.4Q_f + 0.3(Q - Q_f) if Q Q_f D) B = 0.4Q_f - 0.6(Q - Q_f) if Q Q_f

Question

Which incentive scheme would simultaneously elicit accurate information about feasible plant production levels and motivate managers to perform up to potential (in the following schemes, B is the bonus payment, Q is actual plant output, and Q_f is the manager's estimate of feasible output)? A) B = 0.4Q B) B = 0.4(Q - Q_f) C) B = 0.4Q_f + 0.3(Q - Q_f) if Q > Q_f D) B = 0.4Q_f - 0.6(Q - Q_f) if Q < Q_f E) B = 0.4Q_f - 0.6(Q - Q_f) if Q > Q_f

Quizplus · Accepted Answer

Option C incentivizes managers to provide accurate estimates of feasible output (Q_f) because their bonus is partly based on this estimate. Additionally, it motivates them to exceed this estimate because they receive an additional bonus for output (Q) that exceeds their estimate, thus aligning their interests with maximizing plant production.

Which Incentive Scheme Would Simultaneously Elicit Accurate Information About Feasible