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A Theory of Sales Quotas with Limited Liability and Rent Sharing

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  • Oyer, Paul

Abstract

Sales quotas are a fixture of sales compensation plans and are often associated with a significant discrete bonus. This paper shows that, under certain assumptions about salesperson utility and the distribution of sales outcomes, the optimal compensation is a discrete bonus for meeting a sales quota. The results are similar when the assumption of agent risk neutrality is relaxed. The model has implications for many moral hazard problems where the agent has a liability limitation and job-specific skill. Copyright 2000 by University of Chicago Press.

Suggested Citation

  • Oyer, Paul, 2000. "A Theory of Sales Quotas with Limited Liability and Rent Sharing," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 405-426, July.
  • Handle: RePEc:ucp:jlabec:v:18:y:2000:i:3:p:405-26
    DOI: 10.1086/209964
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    References listed on IDEAS

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