A Marketing Scheme for Making Money off Innocent People: A Userâ€™s Manual
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 practicesâ€”giving stock options to consumers who buy the firmâ€™s productâ€”, 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. The aim of the paper is to help create a better regulatory structure.
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