In the textbook, there is an example of a software firm in which the managers provided a financial incentive to get rid of software bugs. The result was that software writers added more bugs into the software. This example shows that:
A) financial incentives should never be used.
B) most employees are very corrupt.
C) incentives can create perverse effects.
D) high-tech firms are unique.

Question

Quizplus · Accepted Answer

This example illustrates the concept of unintended consequences, where the financial incentive led to unintended, negative outcomes. It does not suggest that financial incentives should never be used or that most employees are corrupt. It is also not specific to high-tech firms, as this phenomenon can occur in any industry.

In the Textbook, There Is an Example of a Software