Suppose that Minot Farm Equipment Corporation employs two salespeople.

Each covers an exclusive territory; one is assigned to North Dakota and the other to South Dakota. These two neighboring states have similar agricultural economies and are affected by the same weather patterns. Durham Tractor Company also employs two salespeople. One works in North Carolina, while the other is assigned to Oregon. Farm products and methods vary considerably across these two states. Each firm uses the dollar value of annual sales as a performance measure for salespeople. Which of the firms do you think would benefit most from basing pay on its salespeople’s relative performance? Why?