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|Title: ||Studies of compensation schemes for salespersons incorporating sales effort and asymmetric information considerations|
|Other Titles: ||Kao lü dao xiao shou nu li yu xin xi bu dui cheng yin su de xiao shou ren yuan xin chou ji hua|
|Authors: ||Yao, Xiaoyun (姚曉耘)|
|Department: ||Department of Management Sciences|
|Degree: ||Master of Philosophy|
|Issue Date: ||2008|
|Publisher: ||City University of Hong Kong|
|Subjects: ||Sales personnel -- Salaries, etc.|
Disclosure of information.
|Notes: ||CityU Call Number: HF5439.7 .Y36 2008|
xi, 200 leaves 30 cm.
Thesis (M.Phil.)--City University of Hong Kong, 2008.
Includes bibliographical references (leaves 137-140)
|Abstract: ||This thesis contains two largely independent topics, but they both consider the design of
compensation schemes for salespersons. Topic 1 is covered in Chapters 1 to 7, and
Topic 2 is covered in Chapters 8 to 12.
Topic 1. Comparative Study of Salesperson’s Compensation Schemes for a
Newsvendor Product, Incorporating Sales Effort and Asymmetric Information
Consider an “owner” engages a “salesperson” to sell a product. The achievable sales
depends on the salesperson’s “effort” – a factor that the owner typically cannot measure
accurately (the so-called “moral hazard” problem). Therefore, the owner has to design a
compensation/incentive scheme that rewards the salesperson on the basis of sales
achievements, rather than effort level, even though these achievements also depend on
market conditions – a factor for which the salesperson should not be held responsible.
On the basis of the classical principal-agent theory, a two-echelon Stackelberg
continuous model is built to study the engagement between “owner” and “salesperson”
in different trades. In the first echelon the Stackelberg-leader (i.e., the owner) optimizes
his or her profit with respect to the compensation scheme parameter values and the
order quantity; and in the second echelon, the salesperson optimizes his or her expected
income with respect to sales effort.
The topic reported herein extends the literature in the following ways. (i) We maximize
the owner’s expected profit by optimizing: (a) the parameters for a given compensation
scheme; and (b) the newsvendor product one-time order quantity. Four compensation formats are considered for this scenario, and the conditions under which the bestperforming
schemes are identified. (ii) We consider the effects of and interaction
between a large number of system parameters, including the salesperson’s subsistence
income level, the bias levels of the owner’s estimations of the salesperson’s skill level,
and the effort cost.
Topic 2. Study of Insurance Agent’s Compensation Scheme Incorporating Sales
Effort and Biased Information Considerations
With respect to the second scenario of selling insurance policies, we investigate the
pattern of optimal compensation schemes by considering the insurer profitability and
the long-term relationship between insurer and customer in both mature and nascent
In order to model this long-term commitment between insurer and agent, the classical
principle-agency theory is extended in following ways. (i) We maximize the insurer’s
expected long-term profit by optimizing the agent’s compensation scheme over two
consecutive years. This two-year optimization horizon enables one to consider properly
the reward-tradeoffs between selling new policies and renewing old policies. (ii) We
identify the factors that determine the optimal compensation scheme pattern and the
insurer’s maximum profit under the assumption that the agent is allowed to resign in the
second year. (iii) We examine the influence of accurate level of a given agent’s skill on
the insurer’s profitability.
Key Words: Compensation scheme; Moral hazard; Asymmetric information;
|Online Catalog Link: ||http://lib.cityu.edu.hk/record=b2340609|
|Appears in Collections:||MS - Master of Philosophy |
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