Reference no: EM131043250

You have been having problems with poor performance from your salespeople. Up until now, you have paid your salespeople a fixed salary that is independent of sales. Now you change to a reward system that offers a potentially very high salary, but the salary is based solely on sales - the more sales made, the higher the salary. All other things being equal, you would predict that now:

• " value="0" > A. high and low quality workers would leave your firm in equal proportions as they react negatively to the change.
• " value="1" > B. only low quality workers would apply for jobs at your firm. They would leave their jobs that pay fixed salaries and would have strong incentives to tell you that they are high quality workers.
• " value="2" > C. you would not attract any high quality job applicants at all because of the pressures to perform.
• " value="3" > D. your firm would have fewer adverse selection problems related to the hire of new employees.