Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97742
Authors: 
Inderst, Roman
Ottaviani, Marco
Year of Publication: 
2009
Series/Report no.: 
IMFS Working Paper Series 36
Abstract: 
This paper analyzes the implications of the inherent conflict between two tasks performed by direct marketing agents: prospecting for customers and advising on the product's suitability for the specific needs of customers. When structuring sales-force compensation, firms trade off the expected losses from misselling unsuitable products with the agency costs of providing marketing incentives. We characterize how the equilibrium amount of misselling (and thus the scope of policy intervention) depends on features of the agency problem including: the internal organization of a firm's sales process, the transparency of its commission structure, and the steepness of its agents' sales incentives.
JEL: 
D18
D83
M31
M52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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