Relevant information

• Own multiple phone shops
• Hard to manage all shops so you hire 1 Person to run each shop
• You run the Ontario one
• Can't observe the efforts of the people who are running the other shops, but can see the total sales | Effort Sales
• To provide incentive; their contract looks like: Income = a + b(Sales of phones).
• Sales of phone is in dollars the person generates in sales
• Income is measured in $/week
• How do you use this contract to induce your employees to use the Socially Efficient level of effort?

1. George manages your shop in Guildwood, and Chloe manages your dealership in Cali. Describe the ability of the following contracts to induce each person to choose the Socially Efficient level of effort:

- Chloe is offered a contract that pays her $100 per day as well as 15% of her daily phone sales.

- George must pay you a fee for each car he sells, but he can keep all of the money generated from the sale of that phone.