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Incomplete and imperfect information for sales compensation

Author

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  • Raluca Valeanu

Abstract

Sales force compensation represents the fix and / or variable payment by the company. To compensate agents based on the results, the company set a goal which is brought to their attention through the compensation plan. Applying the model of moral hazard, where the agent behavior cannot be verified, it cannot be specified in the contract what is the expected behavior of the agent. In order to make an offer to contract principal should know the effort that the agent will submit it to define the payment and the contract is determined optimally in trade between the two conflicting objectives of the two participants in the contract. Although agent behavior cannot be verified, the result of this behavior should be measurable at the end of the contract so that the employer may make the contract contingent on effort commission agent for sale of which is measured by the amount of earnings to the company.

Suggested Citation

  • Raluca Valeanu, 2010. "Incomplete and imperfect information for sales compensation," Studies and Scientific Researches. Economics Edition, "Vasile Alecsandri" University of Bacau, Faculty of Economic Sciences, issue 15.
  • Handle: RePEc:bac:fsecub:10-15-83
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    More about this item

    Keywords

    Incentive compensation; sales agents; incomplete information; contracts theory; moral hazard;

    JEL classification:

    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics

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