ECON 306 Lecture Notes - Lecture 16: Opportunity Cost, Adverse Selection, Progressive Alliance Of Socialists And Democrats
24 May 2017
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Summary comparison: piece rate vs time based pay: It is easy to measure the quality and quantity of output. When it"s easier to measure the qulity and quantity of input. A lot more trees were planted with piece rates. (different rates per tree depending on the difficulty to plant in each area) A us company shifted from time rate to piece rate in a windshield company: productivity was increased by 44%. Half of that is due to a sorting effect (low- productivity workers left while high-productivity workers came), half of it is due to people working harder. The data is consistent with the economics but: We lack data on effort, motivation, bonuses, individual performance. Variety of theories but no facts to judge properly! (see 13. 1 p 386) Potential for more from behavioural economics: agency theory and efficiency wage theory: The agency theory is an offshoot of the principle-agent theory, involving efficient contract theory.
