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Compensation plan for competing salespersons under asymmetric information

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  • Lee, Chung-Yee
  • Yang, Ruina

Abstract

We investigate the optimal compensation scheme involving one firm and two competing salespersons deployed in different territories under asymmetric information. The problem is analyzed using a two-stage game. In the first stage, the firm announces the compensation plans. The two salespersons, who are closer to customers, have superior market information and then simultaneously but independently decide which plans to sign. The firm decides the production quantity and the salespersons independently make effort decisions. In the second stage, sales volumes are realized and the associate payments are made.

Suggested Citation

  • Lee, Chung-Yee & Yang, Ruina, 2013. "Compensation plan for competing salespersons under asymmetric information," European Journal of Operational Research, Elsevier, vol. 227(3), pages 570-580.
    • Handle: RePEc:eee:ejores:v:227:y:2013:i:3:p:570-580
    DOI: 10.1016/j.ejor.2013.01.007
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    References listed on IDEAS

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