How can we use the theories of asymmetric information to explain the fact that year-end bonuses are often paid to workers
A)It may be evidence of the validity of efficiency-wage theories.
B)It may in some cases be a response by employers to the moral hazard problem.
C)It may in some cases be a response by employers to the lemons problem.
D)It may in some cases be a response by employers to a hidden characteristic problem.

Question

Quizplus · Accepted Answer

Year-end bonuses can be seen as a response to the moral hazard problem, where there is asymmetric information between the employer and employee regarding the employee's effort level. By providing a bonus, the employer incentivizes the employee to work harder, as they have the potential to earn more money. This aligns the interests of the employer and employee, reducing the potential for shirking or other forms of moral hazard.

How Can We Use the Theories of Asymmetric Information to Explain