Misselling through Agents
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)
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Volume (Year): 99 (2009)
Issue (Month): 3 (June)
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Patrick Bolton & Mathias Dewatripont, 2005.
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262025760.
- Minton, Bernadette & Sanders, Anthony & Strahan, Philip E., 2004. "Securitization by Banks and Finance Companies: Efficient Financial Contracting or Regulatory Arbitrage?," Working Paper Series 2004-25, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Patrick Bolton & Xavier Freixas & Joel Shapiro, 2004.
"Conflicts of Interest, Information Provision, and Competition in Banking,"
NBER Working Papers
10571, National Bureau of Economic Research, Inc.
- Patrick Bolton & Xavier Freixas & Joel Shapiro, 2004. "Conflicts of Interest, Information Provision and Competition in Banking," Working Papers 130, Barcelona Graduate School of Economics.
- Patrick Bolton & Xavier Freixas & Joel Shapiro, 2004. "Conflicts of interest, information provision and competition in banking," Economics Working Papers 760, Department of Economics and Business, Universitat Pompeu Fabra.
- Steven D. Levitt & Christopher M. Snyder, 1997. "Is No. News Bad News? Information Transmission and the Role of "Early Warning" in the Principal-Agent Model," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 641-661, Winter.
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