We study a scenario in which a firm designs the compensation contract for a salesperson who exerts effort to increase the level of uncertain demand and, jointly, the firm also decides the level of inventory to be stocked. We use a newsvendor-type model in which actual sales depend on the...

When wages are transparent, sales agents may compare their pay with that of their peers and experience positive or negative feelings if those peers are paid (respectively) less or more. We investigate the implications of such social comparisons on sales agents’ effort decisions and their...