Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87797
Authors: 
Kauhanen, Antti
Year of Publication: 
2011
Series/Report no.: 
ETLA Discussion Papers, The Research Institute of the Finnish Economy (ETLA) 1247
Abstract: 
This paper studies a retail chain that introduced a sales incentive plan that rewarded for exceeding a sales target and subsequently cut the incentive intensity in addition to increasing the target. Utilizing monthly panel data for 54 months for all 53 units of the chain the paper shows that the introduction of the sales incentive plan increased sales and profitability, while the changes in the plan lead to a marked drop in sales and profitability. Thus, modifying the incentive plan proved costly for the firm. The results are consistent with the gift-exchange model of labor contracts.
Subjects: 
incentive pay
gift exchange
panel data
JEL: 
M52
J33
M54
J53
Document Type: 
Working Paper

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