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A Marketing Scheme for Making Money off Innocent People: A User's Manual

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Author Info
Basu, Kaushik (Cornell University)
Abstract

Firms often give away free goods with the product that they sell. Firms often give stock options to their top management and other employees. Mixing these two practices--giving stock options to consumers who buy the firm's product--, creates a deadly brew. Large numbers of consumers can be lured into buying this product, giving the entrepreneur huge profits and the consumers a growing profit share. But this is a camouflaged Ponzi that will ultimately crash. By analogy it is argued that the common practice of giving stock options to employees can be a factor behind financial crashes.

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File URL: http://www.arts.cornell.edu/econ/CAE/09-09.pdf
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Paper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number 09-09.

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Date of creation: Jun 2009
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Handle: RePEc:ecl:corcae:09-09

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D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
M30 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - General

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This page was last updated on 2009-11-8.

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