Misselling through agents

Roman Inderst and Marco Ottaviani

No 36, IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)

Abstract: This paper analyzes the implications of the inherent conflict between two tasks performed by direct marketing agents: prospecting for customers and advising on the product's suitability for the specific needs of customers. When structuring sales-force compensation, firms trade off the expected losses from misselling unsuitable products with the agency costs of providing marketing incentives. We characterize how the equilibrium amount of misselling (and thus the scope of policy intervention) depends on features of the agency problem including: the internal organization of a firm's sales process, the transparency of its commission structure, and the steepness of its agents' sales incentives.

JEL-codes: D18 D83 M31 M52 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (152)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:imfswp:36

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