A Theory of Sales Quotas with Limited Liability and Rent Sharing

Paul Oyer ()

Journal of Labor Economics, 2000, vol. 18, issue 3, 405-26

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.

Date: 2000
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