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A bonus scheme can be designed that gives a manager the incentive to estimate accurately the size of the plant.
If the manager reports a feasible capacity of 20,000 units per year, equal to the actual capacity, then the bonus will be maximized (at $6000
Companies are learning that bonus schemes provide better results.
The salesperson can be given an array of numbers showing the bonus as a function of both the sales target and the actual level of sales.
Salespeople will quickly figure out that they do best by reporting feasible sales targets and then working as hard as possible to meet them.
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