American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Misselling through Agents
American Economic Review
vol. 99,
no. 3, June 2009
(pp. 883–908)
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 salesforce 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 M31, M37, M52)Citation
Inderst, Roman, and Marco Ottaviani. 2009. "Misselling through Agents." American Economic Review, 99 (3): 883–908. DOI: 10.1257/aer.99.3.883JEL Classification
- M31 Marketing
- M37 Advertising
- M52 Personnel Economics: Compensation and Compensation Methods and Their Effects