To generate downstream sales, manufacturers often spend both effort and compensation when working with their dealers. Existing theories are inconclusive about the interdependent role of the two kinds of instruments in motivating dealer effort; that is, whether they are substitutes or...

Designing compensation plans with an appropriate level of incentives is a key decision faced by managers of direct sales forces. The authors use data on individual salesperson compensation contracts to show that firms design their pay plans to both discriminatingly select, (i.e., attract and...

We analyze a model of hierarchies in organizations where neither decisions themselves nor the delegation of decisions are contractible, and where power-hungry agents derive a private benefit from making decisions. Two distinct agency problems arise and interact: Subordinates take more biased...