Preview

Objective Function of Firm

Satisfactory Essays
Open Document
Open Document
338 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Objective Function of Firm
Objective function of firm: y-w-β+κ, for which β=ũy,κ=dka
Production Function: y=ka
The objective function of firm has been added two functions based on the basic model, -β and +κ, showing the cost and the benefit of non monetary rewards respectively. They are allocated in the firm’s objective function, because the firm is the sender of the rewards, which the firm will have a cost and benefit of the reward from the worker. β is a negative function, since it is the cost of non monetary rewards or the opportunity cost foregone for the rewards to the firm. κ is a positive function; it is the benefit or the return to the firm when using non monetary rewards. It will show the immediate effect of increasing in workers’ effort and productivity after using the non monetary rewards. For example, workers will work harder when they know there is a reward for the best worker, even though it is in the period 1, which every worker do not know what the reward is, it is an immediate effect. κ will be relevant to β, the increase in β, an equal increase or a more increase in κ. This means they are in positive relationship.

Assume the firm will allocate some part of the revenue, y, to the workers as non monetary rewards. In this case, therefore, β would not be a constant, should be a variable.
In reality, firm will choose to allot the some of the profit, y-w, but it will be too complicated to solve for the model, the revenue is preferred.

ũ is the percentage of the rewards measuring in monetary value, it is decided and observed by the firm. ũ ϵ N{0,1}. There is usually a cost to the firm when a non monetary reward given to workers, even a trophy or a certificate is a cost to the firm. This refers that the percentage of the costs of rewards may be very

You May Also Find These Documents Helpful

  • Good Essays

    Wages paid to the firm’s workers – Explicit, as the company would be paying wages…

    • 684 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Elecriccity and Magnatism

    • 1643 Words
    • 7 Pages

    A hostile takeover defense wherein the target firm makes its stock less attractive to a potential acquirer is called…

    • 1643 Words
    • 7 Pages
    Satisfactory Essays
  • Good Essays

    For the risk-free rate, we decided to use the 30-year old Treasury yield, which is currently 4.6%. We believe it is important to match the time horizon when comparing financial assets. Given that stocks have essentially an endless time horizon, the 30-year Treasury seems a more reasonable asset by which to compare stocks. 1-month Treasury Bills, for instance, are comparable to safety-deposit boxes, which are completely safe, but cannot ever yield a return. It’s highly likely that no financial analyst would ever compare a stock to a deposit box; hence, it also doesn’t make sense to compare stocks with very short-term Treasury Bills.…

    • 956 Words
    • 4 Pages
    Good Essays
  • Good Essays

    important in the business of work for wages. Employees work to obtain a salary which allows…

    • 759 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Week 3 Assignment

    • 497 Words
    • 2 Pages

    a Which inputs are fixed and which are variable in the production function of William’s pizza shop? Over what ranges do there appear to be increasing, constant, and/or diminishing returns to the number of workers employed?…

    • 497 Words
    • 2 Pages
    Good Essays
  • Best Essays

    A company’s fundamental purpose and objective of compensation is to provide adequate and equitable rewards to employees at a level that matches theirs skills, abilities and contributions to the company (DeNisi, Angelo S., Griffin, Ricky W., 2008, p. 284. Para. 1). Compensation is the human resource management function that deals with every type of reward that individuals receive in return for performing work – including financial and nonfinancial rewards. Financial rewards include direct payments (e.g. salary) plus indirect payments in the form of employee benefits. Nonfinancial rewards include everything in a work environment that enhances a worker’s sense of self-respect and esteem by others (Cascio, 2006, p.418, Para. 1).…

    • 1391 Words
    • 6 Pages
    Best Essays
  • Good Essays

    Let1 Task1

    • 500 Words
    • 2 Pages

    The final component is Valence. It refers to how much the employee desires the reward. It is also known as the rewards-personal goal relationship. So if the reward is something the employee really wants they will put as much effort as possible to meet their goal so they can get their reward.…

    • 500 Words
    • 2 Pages
    Good Essays
  • Better Essays

    Nonfinancial compensation consists of the satisfaction that a person receives from the job itself or from the psychological and/or physical environment in which the person works. This aspect of nonfinancial compensation involves both psychological and physical factors within the firm’s working environment. The various rewards described comprise a total compensation system” (p. 277) Organizations must follow certain guidelines to design a general compensation package that may be customized to each company as well as each position. Organizations must pay special attention to the indirect benefits that they can offer their employees. For example when offering incentives and bonus plans, companies must be clear and specific to avoid or minimize misunderstandings. End-of-year bonuses are usually expected as part of the employee’s salary, therefore other incentive and bonuses may be added and reserved for employees who excel in their performance and help the company attain their strategic goals. When determining the various benefit plans, an organization must conduct intensive research on the long term financial…

    • 1310 Words
    • 6 Pages
    Better Essays
  • Powerful Essays

    Cost is the expenditure upon resources incurred by a firm in producing and selling its output, Each cost is a charge against revenues and profits for the use or consumption of resources during a trading period. Cost can be classified along the functional lines, distinguishing between production, selling, distribution, administration and finance costs. (Pass 1995)…

    • 1986 Words
    • 6 Pages
    Powerful Essays
  • Good Essays

    During the 1730’s the Cherokees’ and Great Britain formed ties together, even though they were trying to get better the Indians did not have a very good relationship with the new whites that were coming in on their land. Since all of this happened, they were fighting over what land was theirs, what they were able to trade, and loyalty through the Indian tribes. The Cherokees’ had trouble keeping up their traditions and culture due to the fact that they were adapting to the white culture.…

    • 582 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Week 4 Problems

    • 881 Words
    • 4 Pages

    1. In the Deep Creek Mining Company example described in this chapter (Table 7.1), suppose again that labor is the variable input and capital is the fixed input. Specifically, assume that the firm owns a piece of equipment having a 500-bhp rating.…

    • 881 Words
    • 4 Pages
    Good Essays
  • Better Essays

    The long study of human motivation has continuously shown that people will do that which they are rewarded for doing. Based on this concept, compensation has been recognized as the most meaningful professional reward for employees. Companies use compensation and benefits as a means of attracting and maintaining valuable employees. Organizations world-wide have further identified that financial incentives must be paired accordingly with the desired results in order to be the most effective. In recent estimates, a reflected 41% of payroll is comprised of employee benefits (M.U.S.E., n.d.). For this reason, it has become increasingly necessary to implement strategy in developing compensation and benefits packages that meet certain elements, such as being fair, being comparable to the pay of others, and providing satisfaction with the content of the work (M.U.S.E., n.d.).…

    • 1458 Words
    • 6 Pages
    Better Essays
  • Powerful Essays

    The purpose of this paper is to answer a few important questions: Why do companies allocate costs? How do companies allocate costs? And how this cost allocation can affect the decision making of the company. It is important for the companies to find the proper method to allocate the costs. Cost allocation is an important issue in many companies because many of the costs associated with designing, producing and distributing products and services are not easily identified with the products and services that are created. It would have been easier for companies to allocate cost if costs were directly traceable with the products and the cost allocation would have been minor issue for the company. The decision-making process, is heavily relied on the information the company has received from the cost allocation process. By having all the correct information available, decision-making becomes an easier task and having the incorrect information can be affect the company for months or even years. But first let’s talk about cost accounting, cost allocation and it’s purpose.…

    • 2639 Words
    • 11 Pages
    Powerful Essays
  • Powerful Essays

    Calvin Moon Ms. Gillette World History, Block B Nov 28, 2016 Ryu Gwan Sun Essay Japan, affected by the Meiji Restoration, gains lots of power throughout the world as they gained military power from modernizing. As they grew bigger, they started to colonize countries to expand and to show their dominant power. Japan employed gunboat diplomacy to pressure Korea, under the Joseon Dynasty, to sign the Japan–Korea Treaty of 1876, which granted Japan with extraterritorial rights and to force open three Korean ports to Japanese trade. This unequal treaty had allowed Japan to slowly grow power in the Korean politics and later, they managed to control the Korean King, Gojong to create new laws that made Japanese people more superior than the Koreans.…

    • 1646 Words
    • 7 Pages
    Powerful Essays
  • Satisfactory Essays

    | As more firms enter an industry (the number of competitors increases), and holding all else equal, you can expect: Answer…

    • 1335 Words
    • 6 Pages
    Satisfactory Essays