Personnel Economics Application Paper

1036 Words Feb 4th, 2013 5 Pages
Personnel Economics Application Paper
Tournament is a kind of reward system where fixed rewards are used for a fixed group of people and the “distribution of rewards is based on the order of the participants’ performance” (Lazear & Oyer, 2009, p. 9). In this particular situation, four agents in one of Mitch & Murray’s offices are given a strong incentive to succeed in a sales tournament. Mitch & Murray uses a set of prizes that diminish in value as a person’s relative performance gets lower. The top seller will win himself a Cadillac, the second will win himself a set of steak knives, and the others will be out of job (Glengarry Glen Ross, n.d.). In response to the given prizes, four agents react in different ways.
For Ricky
…show more content…
The first prize is unachievable while the second prize is not big enough to provide incentive for them to exert effort. Thus, Dave comes up with the idea to steal and sell the good leads to another company. His responses to the sales tournament can also be explained by economic theories – As homo economicus, Dave persuades Shelly to commit the crime together with him because in this way, both of them can maximize their profit with lowest costs, even though they have to take the risk. However, for George Aaronow, a risk-adverse person, the risk entailed in the crime exceeds the profit he may gain, which in the end discourages him from partnering with Dave to commit the crime.
All four employees are afraid of getting the third prize, being fired, but with their own unique utility curve and risk preference, they choose to respond in the way that leads to the consequence with no surprise.
Sometimes a large prize can provide enough incentive for the employee to exert more effort to work, but sometimes it cannot. The size of the prize is not the key factor that affects a worker’s working attitude, on the other hand, the cost of the employee’s effort and the role of luck are what may affect the incentive. Furthermore, to motivate the employee to work harder, we have to take into consideration of the employee’s needs from the psychological perspective, for example, in this case, the fancy Cadillac is the motivation only for Ricky, not for the

Related Documents