An optimal scheme is one that gives the employer the highest expected profit net of compensation paid, subject to the constraint that the employee must be given compensation package attractive enough to get him to accept the job. 1 - The optimal compensation scheme for the employee will typically involve him getting more compensation the greater is x. But, at the same time, he will not bear entirely the risk of the venture: He will be guaranteed a base wage, even if x = O.
2 - In general, the completely optimal compensation scheme is a complicated function of x. But if we restrict attention to more realistic and simpler compensation schemes where the employee is paid a base wage of B and a bonus of b per unit of x produced, we typically find that B is greater than zero and b is smaller than the "full" value of a unit of output to the employer.
3 - In some instances, the value of the services provided to the employer may not be known when it comes time to pay off the employee. For example, the branch manager of a bank may decide on loans to make, and it will take years to discover whether those loans perform well or not. In such cases, incentive payments can and should be made on the basis of any observable variable that is statistically related to the value of the services provided. For example, a branch manager might have her compensation based on the quality of a randomly selected sample of loans that she makes, where the quality of one of those loans is determined by independent examiners. 4 - Other things held equal, incentive compensation works better the better (less noisy) the compensation-linked variable is as a signal about the employee's level of effort. leia todo o artigo
