1.Customers who rent copier machines for their office from Company X ("XCO") are given a customer service number at XCO to call if they have problems with the machine. A customer service employee at XCO may be able to explain how to fix the problem by talking on the phone.Automation and troubleshooting of the process is accomplished by a computer program that leads XCO customer service employees through a menu to help them understand problems that customers report and then explain to the customer how to solve the problem.

If the problem cannot be solved over the telephone, then a service technician is sent by XCO, via a referral from the customer service department, to the customer's office location to fix the machine.

Customer Service employees get paid by XCO based on the number of calls they take per day.

The service technicians are paid based on the number of service calls they make to fix machines.

A.What is XCO's intent with these policies (customer service vs service technician) assuming they want shareholder return as high as possible?

B.Given the arrangements described above, what are the actual incentives X Co has created, Vis a Vis the Rational Actor Paradigm, for customer service employees and service technicians? Describe the behavior(s) you expect to observe when studying the customer service and service technician departments.

C.Given answer to B, how is the profit and loss statement affected, in terms of the bottom line, in relation to XCOs stated corporate objective for shareholders.

D.What can be done about the problem?Explain how to will end the perverse incentives of the arrangement?