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The Impatient Salesperson and the Delegation of Pricing Authority

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  • Edward P. Lazear

Abstract

Sales agents are impatient relative to owners. If a good fails to sell, the owner still retains possession of that good and can enjoy its services, whereas the agent receives nothing. As a consequence, sales agents prefer a lower price than does an owner. Owners are therefore reluctant to delegate pricing authority to sales agents even when the agents have superior market information. Pricing authority is more likely to be delegated to agents when the owner lacks monopoly power and sells competitively and when the good is a non-durable. Agents who are given pricing authority are less likely to be paid commissions and more likely to be on a straight salary.

Suggested Citation

  • Edward P. Lazear, 2014. "The Impatient Salesperson and the Delegation of Pricing Authority," NBER Working Papers 20529, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:20529
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    1. Michela Cella & Federico Etro, 2016. "Contract competition between hierarchies, managerial compensation and imperfectly correlated shocks," Journal of Economics, Springer, vol. 118(3), pages 193-218, July.
    2. Magnus Johansson & Göran Olsson & Linn Andersson, 2017. "Value creation character and value assessment responsibility," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 16(1), pages 56-75, February.

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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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