A risk-averse manager is hired to run a firm for shareholders. If shareholders cannot observe the manager's effort, which would be the best employment contract?
a. a high-powered incentive contract to elicit maximum effort.
b. a fixed salary.
c. a moderately powered incentive scheme that elicits some effort without exposing the manager to too much risk.
d. an incentive scheme that provides maximum incentives and maximum insurance.
Question 2
A risk-averse manager is hired to run a firm for shareholders. If the manager's effort can be observed and specified in a contract, which would be the best employment contract?
a. a high-powered incentive contract to elicit the most effort.
b. a fixed salary paid as long as the required effort is undertaken.
c. a proportion of profits paid as long as the required effort is undertaken.
d. a wage well in excess of his or her outside opportunity.
Risk for injury
Risk for falls
Dual Systems Model of Risk-Taking
One-handed kneading. Tissues are lifted with the whole hand in firm contact.
Apply light circular friction over the wrist using your thumbs. Observe the skin moving over the ...
Pregnant and Lactating Women, Children, the Ill, and Older Adults Are at the Highest Risk