A collection company hires an independent software company to design software that will increase the efficiency of the workers. If the amount of money collected increases after the software is implemented, then the software company will be paid 4% of that increase. This is an example of incentive contracting.

Question

Quizplus · Accepted Answer

Incentive contracting involves incentivizing a party to achieve certain goals or outcomes. In this scenario, the software company is incentivized to increase the amount of money collected by the collection company by offering them a percentage of the increase. Therefore, this is an example of incentive contracting.

A Collection Company Hires an Independent Software Company to Design