Technical Note-Impact of Inventory on Quota-Bonus Contracts with Rent Sharing

• 成果类型: Article; Proceedings Paper
• 署名作者: Dai, Tinglong; Jerath, Kinshuk
• 署名单位: Johns Hopkins University; Columbia University
• 刊物名称: OPERATIONS RESEARCH
• ISSN/ISSBN: 0030-364X
• DOI: 10.1287/opre.2015.1461
• 发表日期: 2016
• 页码: 94-98
• 关键词: limited-liability; salesforce compensation; INFORMATION; plans

摘要

We study the impact of limited inventory on optimal sales-force compensation contracts. We adopt a principal-agent framework, characterized by limited liability and rent sharing with the agent. A commonly invoked assumption in the inventory management literature is that the demand distribution satisfies the increasing failure rate (IFR) property. Under this assumption, however, past research has established that a quota-bonus contract-a widely adopted sales-force compensation contract in the practice-cannot sustain in equilibrium. We show that because of demand censoring in the presence of limited inventory (i.e., demand realizations higher than the inventory level are unobservable), a quota-bonus contract is the optimal equilibrium contract, and it exists, even for a demand distribution with the IFR property. Since most well-known distributions satisfy the IFR property, and inventory constraints are operative in many real-world situations, our results significantly extend the scope of the optimality of quota-bonus contracts and underscore the importance of considering the inventory aspect while making sales-force compensation decisions.