(In the experiment on teacher incentives in India (Muralidharan & Sundararaman),

Question

(In the experiment on teacher incentives in India (Muralidharan & Sundararaman), the incentive scheme implemented in the treatment goup can be described in the following figure. That is, a teacher will get base salary no matter how he perfoms. if his performance passes a threshold level, the bonus rises with the performance measure.

(1) What are the goods and the bads of the scheme? If you are the employer, why might you use this type of scheme in practice (instead of the other)? (Hint: consider how your employees would respond to the scheme and what would be your cost. The benefit of increasing employees' performance may depend on the type of job.)

(2) Provide a good example from the real world where this scheme would be a good fit.

Explanation / Answer

Goods Of the Scheme are: A bonus payment is used as a means of appreciation for an employees hard work throughout the year and receiving a bonus will not only show the amount of appreciation but also the employee will feel motivated to do more hard work

Disadvantage: It may become costly for company as well as employess has to pay taxes also for the bonus they received.

Therefore according to me The company should give bonus according to the performances howed by an employee in an year and the employees will also take this decison in positive way and will be motivated to perform much better than before to earn the bonus and incentive

2) The scheme would be a good fit where there is a work of sales. As in sales the target is set and the employees have to accomplish the target and the bonus will be earned by the one who acheives the target in minimum time and with high turnover.

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