Question content areaPart 1A firm is considering two policies to increase worker output. The first policy would involve an increased wage described as an incentive for workers to increase their effort. The second policy is to announce a voluntary bonus for those workers whose effort is deemed to be extraordinary.Using the insights from behavioral economics, which policy is likely to be more effective?
Part 2
A. The second policy will be more effective since it stimulates loss aversion in workers who would prefer to work through an incentive program and earn the money than to be given the money directly.
B. The first policy will be more effective since it creates an endowment effect where workers will value the additional money they actually receive more than the money they could possibly earn through the second policy.
C. The second policy will be more effective since it creates an endowment effect where workers would prefer to work through an incentive program and earn the money than to be given the money directly.
D. The first policy will be more effective since it is more salient. Workers can assess the perceived importance of the two policies and will find the first one more salient.
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