If good salespeople are extremely risk averse,then a choice between a fixed-fee contract and a contingent contract
A) avoids a moral hazard.
B) will result in all job candidates choosing the contingent contract.
C) will result in an efficient contract.
D) may not be a good screening device.

Question

Quizplus · Accepted Answer

Good salespeople are risk averse and prefer a fixed fee contract because it mitigates the risk of not earning enough if they don't sell enough. A contingent contract, on the other hand, offers higher potential earnings but also higher risk if they don't meet the targets. Therefore, offering both options may not be a good screening device as it may not accurately identify the risk aversion of the job candidate.

If Good Salespeople Are Extremely Risk Averse,then a Choice Between