New commission structure motive salespeople, Managerial Economics

A medical insurance company offers its salespeople the following compensation scheme: each worker takes a fixed salary  and, in addition to that, a commission depending on the volume of sales they generate. At the time, the salespeople are paid 10% of each sale they make that is above €3,500 per day. In order to motivate its salespeople to work harder, the company has decided to alter the commission structure and offer 25% for sales above €5,000. In all cases, the workers have to produce a minimum of €2,500 or else they are fired.

a) Demonstrate both compensation schemes in a graph. 

b) Will the new commission structure motive salespeople to work harder, and why?

 

Posted Date: 3/26/2013 3:06:35 AM | Location : United States







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