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The difference is that if you know your budget is X, you'll probably try to spend X - epsilon, because that maximizes your personal outcome within the rules. B
by sowbug 10y ago
The difference is that if you know your budget is X, you'll probably try to spend X - epsilon, because that maximizes your personal outcome within the rules.
But if you get a credit based on the difference, then you'll have a shared incentive with the budget-maker to spend much less than X.
However, then you have the problem that if X is per trip, then there's a perverse incentive to maximize the number of trips (even if they're each well under budget) because you pocket the cumulative credit. Then you can go way over X on the trips you actually care about.
- caminante 10y agoGiving credits for cost-saving isn't the problem. Companies do that with travel expenses. What you're describing is really the same as giving employees an annual discretionary travel budget. Here's the problem: It sounds like Google didn't implement financial controls. The employees committed fraudulent transactions by booking travel from outlying years and get credits for use in the current year. That shouldn't have been allowed. This was unclear in the original post and the commenter graciously clarified.