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The Effect of Sales Incentives on Business Seasonality

Author

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  • Paul Oyer

    (Princeton University)

Abstract

This paper shows that, in addition to varying with the calendar business cycle, manufacturing firms' sales are significantly higher at the end of the fiscal year, and lower at the beginning, than they are in the middle. The causes of these fiscal-year effects are investigated, emphasizing the role of salespeople and their motivation to meet quotas and earn a bonus. In many industries firms have substantially lower average prices toward the end of fiscal years, but price changes cannot explain all the effect of fiscal years on revenue seasonality. It is shown that the industry variation in the fiscal year revenue and price effects are correlated with type of product, distribution method, and the industry average salesperson turnover rate. The results are consistent with a sales quota model of fiscal seasonality, where all salespeople can vary their effort throughout the fiscal year but only some salespeople can influence the timing of their customers' purchases.

Suggested Citation

  • Paul Oyer, 1995. "The Effect of Sales Incentives on Business Seasonality," Working Papers 733, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:354
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    File URL: https://dataspace.princeton.edu/bitstream/88435/dsp0137720c73w/1/354.pdf
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    Cited by:

    1. Douglas Evanoff & Lewis Segal, 1997. "Strategic Responses to Bank Regulation: Evidence From HMDA Data," Journal of Financial Services Research, Springer;Western Finance Association, vol. 11(1), pages 69-93, February.
    2. Robert Gibbons, 1996. "Incentives and Careers in Organizations," NBER Working Papers 5705, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    compensation; incentive contracts; seasonality; fiscal year; salespeople;
    All these keywords.

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General

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