Law of Diminishing Marginal Utility

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Date Submitted: 09/05/2016 01:51 AM

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“The Law of Diminishing Marginal Utility”

When I first started working at my company, I rarely worked any overtime. A few months later, my boss had given each of her direct reports a limit of three hours per week for overtime. Needless to say, upper management was not fond of any time worked after the regular eight-hour shift. For me on the other hand, overtime seemed great (at the time) because I would get paid time and a half. The additional money was definitely an incentive to put in an extra hour or two just as Chapter 1 states “people respond to incentives.” However, now that I am averaging 2 hours of overtime every day I have experienced the concept of “the law of diminishing marginal utility” first hand.

As part of the HR team, we have been recruiting heavily due to the 70 outstanding roles we are working to fill. In addition, my team is down one employee due to an unexpected medical leave. Therefore, I am not the only one staying late to finish the day’s work. The difference is that I am the only non-exempt employee on the team entitled to overtime pay, so I see overtime from a different perspective. Looking back at this past month, I realize that the marginal utility of working just 30 minutes of overtime is in my interest due to the pay increase in exchange for minimal additional effort. However, as I put in more hours of overtime, the marginal utility eventually diminishes to zero due to mental/physical fatigue and the fact that I feel I have made sufficient salary for the day.

Working only 30 minutes of overtime every day is great because I am getting paid for 45 minutes of work due to overtime. Increasing my overtime to one hour every day is bearable. I chose the term “bearable” rather than “good” or “okay” because the marginal utility from my first extra 30 minutes to my next decreases. My additional utility derived from every extra dollar of income falls because I have already earned a sizeable amount.

After staying an hour and a half past...