What is one potential problem with offering a choice of contracts to two different employees?
A) If Employee A is paid more than Employee B, Employee A might sue for discrimination.
B) Employee A might be paid less than Employee B, proving statistical discrimination.
C) The two employees might compare salaries without comparing risk-preferences, thereby running the risk of jealousy or claims of discrimination.
D) The two employees might compare risk preferences without comparing salaries, thereby running the risk of jealousy or claims of discrimination.

Question

Quizplus · Accepted Answer

Offering a choice of contracts to two different employees might result in the two employees comparing salaries without comparing their individual risk-preferences, which can result in jealousy or claims of discrimination. Therefore, option C is the best answer choice. Option A and B are not relevant to the scenario, and option D is not a potential problem.

What Is One Potential Problem with Offering a Choice of Contracts