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Unformatted text preview: nce put in incentives! !
Ability vs. Effort!
*suppose ability and effort could be separated!
• Suppose that the individual output in a ﬁrm could be separated so that:!
Suppose the compensation is:! Econ 101 !
• Wage = Effort + (Average Ability)!
Will this dilute incentives? !
Wait, are we assuming effort and ability are all equal amongst individuals?!
In this scheme, an industrious idiot will make more than lazy genius! Day-care experiment!
• 10 day care centres observed ver 20 weeks!
• ﬁnes introduced for parent who picked up their kids late!
• ﬁrst 4 weeks : no...
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- Winter '13