Strategic compliments in sales

Amin Sayedi () and Jeffrey D. Shulman ()
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Amin Sayedi: University of Washington
Jeffrey D. Shulman: University of Washington

Quantitative Marketing and Economics (QME), 2017, vol. 15, issue 1, No 3, 57-84

Abstract: Abstract Salespersons often spend time and money giving prospective buyers compliments such as kind words, meals and gifts. Though prior research has shown that compliments will influence a prospective buyer’s decision, it is unknown the extent to which salespersons should make these investments. In this paper, we develop an analytical model to examine how seller and buyer characteristics affect the equilibrium provision of compliments by the seller. We establish that the optimal magnitude of compliments is non-monotonic in the buyer’s sensitivity to compliments. We identify conditions for when a seller of a high-quality product will offer greater (or lesser) compliments than a seller of a lower quality product. We show that, under certain conditions, an uninformed buyer earns greater utility than a buyer who knows the quality of the seller’s product. The findings have implications for sellers in their choice of compliments and buyers in the inferences they draw from the compliments received.

Keywords: Game theory; Sales; Signaling; Compliments (search for similar items in EconPapers)
JEL-codes: C70 D03 M31 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11129-016-9177-2

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