The "Sales Agent" Problem : Effort/Leisure Allocation under Performance Pay as Behavior towards Risk
| Type of Publication: | Journal article |
| Publication status: | Published |
| Author: | Cadsby, C. Bram; Song, Fei; Zubanov, Nick |
| Year of publication: | 2019 |
| Published in: | Economic Inquiry ; 57 (2019), 4. - pp. 1997-2016. - ISSN 0095-2583. - eISSN 1465-7295 |
| DOI (citable link): | https://dx.doi.org/10.1111/ecin.12821 |
| Summary: |
The choice between safe and risky assets represents behavior towards risk: more risk‐averse investors buy more safe assets. We develop and test a general model that applies this intuition to the time allocation between risky effort and risk‐free leisure under linear incentives. When risk increases with effort, risk‐averse agents choose less effort, but when risk is independent of effort, effort choice is unaffected by risk preferences. In many incentive contracts, income risk is multiplicative with, rather than additive to effort, sales commissions being one example. In such cases, lower effort by the risk‐averse is a hitherto undocumented behavior towards risk.
|
| Subject (DDC): | 330 Economics |
| Bibliography of Konstanz: | Yes |
| Refereed: | Yes |
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CADSBY, C. Bram, Fei SONG, Nick ZUBANOV, 2019. The "Sales Agent" Problem : Effort/Leisure Allocation under Performance Pay as Behavior towards Risk. In: Economic Inquiry. 57(4), pp. 1997-2016. ISSN 0095-2583. eISSN 1465-7295. Available under: doi: 10.1111/ecin.12821
@article{Cadsby2019-10Sales-46379, title={The "Sales Agent" Problem : Effort/Leisure Allocation under Performance Pay as Behavior towards Risk}, year={2019}, doi={10.1111/ecin.12821}, number={4}, volume={57}, issn={0095-2583}, journal={Economic Inquiry}, pages={1997--2016}, author={Cadsby, C. Bram and Song, Fei and Zubanov, Nick} }
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