The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales
This article investigates the pricing distortions that arise from the use of a common nonlinear incentive scheme at a leading enterprise software vendor. The empirical results demonstrate that salespeople are adept at gaming the timing of deal closure to take advantage of the vendor’s accelerating commission scheme. Specifically, salespeople agree to significantly lower pricing in quarters in which they have a financial incentive to close a deal, resulting in mispricing that costs the vendor 6%–8% of revenue. Robustness checks demonstrate that price discrimination by the vendor does not explain the identified effects.
Year of publication: |
2014
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Authors: | Larkin, Ian |
Published in: |
Journal of Labor Economics. - University of Chicago Press. - Vol. 32.2014, 2, p. 199-199
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Publisher: |
University of Chicago Press |
Saved in:
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