Your Incentive Contract

1 Bonus / no penalty

Each round, ABC Company will pay you:

1) a base salary of 1,000 Lira, and

2a) no bonus if you achieve a low outcome,
2b) a bonus of 1,000 Lira if you achieve a medium outcome, OR
2c) a bonus of 2,000 Lira if you achieve a high outcome.

Thus, if you achieve a high outcome, you will be compensated a total of 3,000 Lira (1,000 Lira base salary plus 2,000 Lira bonus). If you achieve a medium outcome you will be compensated a total of 2,000 Lira (1,000 Lira base salary plus 1,000 Lira bonus). If you achieve a low outcome, you will be compensated a total of 1,000 Lira (base salary only).

2 No bonus / penalty

Each round, ABC Company will pay you:

1) a base salary of 3,000 Lira, and

2a) no penalty if you achieve a high outcome,
2b) a penalty of 1,000 Lira if you achieve a medium outcome, OR
2c) a penalty of 2,000 Lira if you achieve a low outcome.

Thus, if you achieve a high outcome, you will be compensated a total of 3,000 Lira (base salary only). If you achieve a medium outcome you will be compensated a total of 2,000 Lira (3,000 Lira base salary less 1,000 Lira penalty). If you achieve a low outcome, you will be compensated a total of 1,000 Lira (3,000 Lira base salary less 2,000 Lira penalty).

3 Bonus / penalty

Each round, ABC Company will pay you:

1) a base salary of 2,000 Lira, and

2a) no bonus or penalty if you achieve a medium outcome,
2b) a bonus of 1,000 Lira if you achieve a high outcome, OR
2c) a penalty of 1,000 Lira if you achieve a low outcome.

Thus, if you achieve a high outcome, you will be compensated a total of 3,000 Lira (2,000 Lira base salary plus 1,000 Lira bonus). If you achieve a medium outcome, you will be compensated a total of 2,000 Lira (base salary only). If you achieve a low outcome, you will be compensated a total of 1,000 Lira (2,000 Lira base salary less 1,000 Lira penalty).

You will be informed whether you achieved a high, medium, or low outcome at the end of each round.