Answered

Which of the following best characterizes the difference between commission and pure bonus compensation schemes to solve the problem of moral hazard in employer-employee relationships?

A. Bonus systems offer more consistent but weaker incentives than commission systems.
B. Bonus systems offer no insurance to the agents but commission systems do.
C. Bonus systems offer insurance to the agents but commission systems never do.
D. Bonus systems offer higher powered but relatively inconsistent incentives for effort.



Answer :

GinnyAnswer

Final answer:

Bonus systems offer insurance to agents and higher-powered but inconsistent incentives compared to commission systems.


Explanation:

Bonus systems offer insurance to the agents as they provide a safety net of additional income, mitigating risk compared to pure commission systems which lack this feature. Additionally, bonus systems provide higher-powered but relatively inconsistent incentives for effort, encouraging employees to strive for greater rewards.


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