Working under the influence of technology: Do you pay for the expected output, or for the probability of reaching the output threshold
Résumé
This paper addresses a problem of implementation for analyzing how technology and informational asymmetries influence the components of both linear and piecewise linear compensations in light of a principal-agent model. It explores how technological conditions may manage incentives when a single worker is responsible of a task. The characterization of incentive wages shows the conditions that determine if “does one's compensation depend directly on what one expects to produce?” or “does one's compensation depend directly on what level of output one has the probability of reaching?” In doing so, not only it clarifies the nature and effects of base salaries, commission rates, and bonuses, but also underlines that convex or concave wages lead sometimes to perverse effects. It will also reconcile theory with practice, i.e. managerial decision-making in both historical-industrial applications as well as in the current context.