ABSTRACT
At the end of this chapter, readers should be aware that:
There are numerous types of incentive that may be utilised, depending on the nature of the work environment;
Incentives will not be effective under all circumstances;
Performance will vary over the course of the working day;
The principal–agent problem is linked to problems of asymmetric information, adverse selection and moral hazard;
Whether to use time rates or piece rates depends partly on the size of monitoring costs;
The success of rank order tournaments depends on the strength of incentives to finish first or earn promotion;
Profit-sharing schemes and labour-managed firms are based on group rather than individual incentives.