Sales Quota Plans: Mechanisms For Adaptive Learning

A vexing problem in managing sales forces occurs when the sales manager does not know the characteristics of a sales territory. In this paper we show how sales quota-bonus plans can be optimally used to learn about unknown territory characteristics over a multiperiod horizon. We demonstrate this process in two scenarios—one in which the sales manager and the rep are symmetrically informed about the territory characteristics, and the other in which the rep is better informed than the manager. Overall our analysis underscores the importance of Bayesian techniques in sales force management.     

Equity and Adverse Selection

We introduce concerns with inequity into the canonical adverse selection model. We find that aversion to ex post inequity is not constraining for the principal if the two agents are identical ex ante, but generally is constraining when the agents differ ex ante. Constraining equity concerns can lead to output levels that are either above or below standard levels, and can result in only one agent experiencing systematic inequity in equilibrium.