Pirate captains during the 1600s compensated crewmembers with a form of health insurance. If a member lost a hand or leg or other appendage during a fight, he would get a free prosthetic (e.g., a wooden leg, which were quite expensive even then). What kind of incentive structure does this most closely resemble? (Hint: Those who lost a limb generally did so because they were doing a larger share of the fighting.)
A) hourly rates
B) tournaments
C) piece rates
D) corporate culture

Question

Quizplus · Accepted Answer

The incentive structure that most closely resembles the compensation offered by pirate captains is piece rates. This is because crewmembers were given a reward (a prosthetic) for their individual contribution to the fighting, which in this case was losing a limb. The larger their share of the fighting, the greater the likelihood they would require a prosthetic, and therefore the more valuable the compensation. Hourly rates, tournaments, and corporate culture do not offer rewards based on individual contributions in the same way.

Pirate Captains During the 1600s Compensated Crewmembers with a Form