Question

In: Economics

You are the owner of a clothing retail store in Manhattan that sells brand name clothes,...

You are the owner of a clothing retail store in Manhattan that sells brand name clothes, including high-end clothing brands. Your retail salespersons are paid a mean hourly wage of $12. Over the last several months, your sales have significantly declined and customer satisfaction surveys indicate that your customers are increasingly dissatisfied with the quality of service. You just took an online course in managerial economics in which you learned about the concepts of efficiency wage and principal-agent problem. To what extent should you apply these two concepts to increase the motivation of your retail salespersons? Should you pay efficiency wages? Should you redesign the structure of compensation in terms of fixed pay (hourly wage) and variable pay (bonus, commissions…)?

Solutions

Expert Solution

  Answer

The market outcomes is terribly totally different with uneven info. The uneven info downside happens once there's lack of data concerning the economic agents and therefore the merchandise within the market.
The uneven info creates inefficient market outcomes by making several issues. The downside that arises in AN economic dealings that involves uneven info is named principle agent problem. In principle–agent draw back the principle hires associate degree agent to perform certain task but fails to look at the self-interest driven action of the agent and this alters the profit of the principle.

If a labor is hired to perform a job and it is not possible to monitor her work, it is best to tie the reward of the labor to firm’s performance. This will reduce the principle-agent problem and will increase the net benefit of the producer.

The performence of the retail salesperson should be measured by the number of unit he/she sales. This will make the firm judge and distinguish between most productive agent to unproductive agents.

The store must redisgn the payment structure such a way that the agent will get the fraction of sales or bonus and incentive based upon the unit sales. This way each employee will be productive and this will increase the sales of the firm too.


Related Solutions

You are the owner of a clothing retail store in Manhattan that sells brand name clothes,...
You are the owner of a clothing retail store in Manhattan that sells brand name clothes, including high-end clothing brands. Your retail salespersons are paid a mean hourly wage of $15. Over the last several months, your sales have significantly declined and customer satisfaction surveys indicate that your customers are increasingly dissatisfied with the quality of service. You just took a course in microeconomics for business decisions in which you learned about the concept of principal-agent problem. To what extent...
You are the owner of a clothing retail store in Manhattan that sells brand name clothes,...
You are the owner of a clothing retail store in Manhattan that sells brand name clothes, including high-end clothing brands. Your retail salespersons are paid a mean hourly wage of $15. Over the last several months, your sales have significantly declined and customer satisfaction surveys indicate that your customers are increasingly dissatisfied with the quality of service. You just took a course in microeconomics for business decisions in which you learned about the concept of principal-agent problem. To what extent...
You are the owner of a clothing retail store in Manhattan that sells brand name clothes,...
You are the owner of a clothing retail store in Manhattan that sells brand name clothes, including high-end clothing brands. Your retail salespersons are paid a mean hourly wage of $15. Over the last several months, your sales have significantly declined and customer satisfaction surveys indicate that your customers are increasingly dissatisfied with the quality of service. You just took a course in microeconomics for business decisions in which you learned about the concept of principal-agent problem. To what extent...
Boston Retail Company (clothing chain) is working with several suppliers of new and second-hand clothes. Store...
Boston Retail Company (clothing chain) is working with several suppliers of new and second-hand clothes. Store managers have the freedom to decide which supplier(s) they wants to work with and the amount and types of clothes they want to order for their stores in each season. The prices charged by each supplier are based on the price per piece of cloth and the total number of clothes ordered. A store manager first places the order with a supplier. After receiving...
Following describes the credit sales procedures for clothing wholesaler that sells name-brand clothing to department stores...
Following describes the credit sales procedures for clothing wholesaler that sells name-brand clothing to department stores and boutique dress shops. The company sells to both one-time and recurring customers. A flowchart of the system is provided in the figure labeled Problem 5: Internal Control. Customer orders are received by fax and e-mail in the sales department. The sales clerk, who works on commission, approves the credit sale, calculates commissions and discounts, and records the sale in the sales journal from...
11. Running On Carla Gomez is the owner of Running On—a retail store that sells shoes...
11. Running On Carla Gomez is the owner of Running On—a retail store that sells shoes and accessories to runners. Carla is trying to decide what she should do with her retail business and how committed she should be to her current target market. Carla started Running On retail store in 1994 when she was only 24 years old. At that time, she was a nationally ranked runner and felt that the growing interest in jogging offered real potential for...
Ralph is the owner of a business that sells clothing.
Ralph is the owner of a business that sells clothing. You have determined that he has an annual turnover of $3 million and his net asset value is $7 million. Which of the following is correct?Ralph cannot claim the general small business entity concessions while he is a going concern, but he can claim the capital gains tax small business concessions when he sells the business.Ralph can claim the general small business entity concessions while he is a going concern...
Question 2) Internal Controls Ramona's Clothing is a retail store specializing in women's clothing. The store...
Question 2) Internal Controls Ramona's Clothing is a retail store specializing in women's clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through January 31, with a receipt, for cash or exchange. If the customer does not have a receipt, cash will still be refunded for any item under $75. If the item is more than $75, a check is...
Part 1. Internal Controls Ramona's Clothing is a retail store specializing in women's clothing. The store...
Part 1. Internal Controls Ramona's Clothing is a retail store specializing in women's clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through January 31, with a receipt, for cash or exchange. If the customer does not have a receipt, cash will still be refunded for any item under $75. If the item is more than $75, a check is...
SallyMay, Inc., designs and manufactures T-shirts. It sells its T-shirts to brand name clothes retailers in...
SallyMay, Inc., designs and manufactures T-shirts. It sells its T-shirts to brand name clothes retailers in lots of one dozen. SallyMay's May 2013 static budget and actual results for direct inputs are as follows: Static Budget Number of T-shirt lots (1 lot1 dozen) 400 Per Lot of T-shirts: Direct materials 14 meters at $1.70 per meter$23.80 Direct manufacturing labor 1.6 hours at $8.10 per hour $12.96 Actual Results Number of T-shirt lots sold 450 Total Direct Inputs: Direct materials 6,840...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT