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Salesperson Compensation Strategy
A company hires a remote salesperson on a fixed salary. The company cannot easily monitor the salesperson's daily effort, but this effort directly increases the probability of making sales, which benefits the company. The salesperson, however, incurs a personal cost for exerting high effort (e.g., time, energy). The company anticipates that the salesperson may choose a level of effort that is lower than what would be ideal for the company's profitability. Propose a specific modification to the salesperson's compensation contract that the company could implement in response to this situation. Justify your proposal by explaining how it alters the salesperson's incentives and helps align their actions with the company's goals.
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Social Science
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CORE Econ
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Economy
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