Optimal Salesforce Compensation with General Demand and Operational Considerations

• 成果类型: Article; Early Access
• 署名作者: Song, Haotian; Lai, Guoming; Xiao, Wenqiang
• 署名单位: Zhejiang University; University of Texas System; University of Texas Austin; New York University
• 刊物名称: M&SOM-MANUFACTURING & SERVICE OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1523-4614
• 发表日期: 2024
• 关键词: optimal contract; sales and operations planning; supply/demand mismatch; demand censoring; inventory delegation

摘要

Problem definition: : We investigate the optimal salesforce compensation scheme in the context of private information and unobservable actions, considering common operational factors encountered in practice, including inventory costs, contractible versus censored demand information, and controlled versus delegated ordering. Methodology/ results: : Based on an agency model with general demand and cost functions, we derive optimality conditions for implementable contracts that can achieve the second-best outcome in all scenarios. The contracts are in the forms of a menu with linear compensation for demand or sales, incorporating inventory costs. Moreover, the contracts feature adjustments in compensation corresponding to the ordering level if it is delegated. Managerial implications: Our study reveals that, under reasonably mild conditions, optimal salesforce contracts can still maintain relatively simple forms, even when confronted with common operational factors and generalized demand and cost functions. However, the contracts must be tailored to suit the operational settings. Intriguingly, neither the loss of demand information nor the delegation of inventory decisions would compromise system efficiency at optimum.