lecture_7_tab - Individual Performance Evaluation -...

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ECOS3003 Lecture 7 1 Individual Performance Evaluation - compensation and performance evaluation linked Assume - P knows output fn - can observe output, but not effort - output only measure of performance - employee produces single output - employee works independently (no team) - any mutually beneficial contract feasible Look at when these issues are relaxed
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ECOS3003 Lecture 7 2 Benchmarking - how do firms set standard for ‘average worker’? - estimated (a) time and motion studies (b) past performance - ratchet effect - how to avoid? piece rate that does not change frequent job rotation (loss of specific HC)
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ECOS3003 Lecture 7 3 Measurement costs observable – two transacting parties can observe output/variable of interest verifiable/contractible – output can be verified by an outside party (court) - output is a coarse measure of employee effort
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ECOS3003 Lecture 7 4 Worth making some attempts to better measure employee action/effort - reduce employee exposure to risk – reduce wage premium
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lecture_7_tab - Individual Performance Evaluation -...

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