Do Agents Game Their Agents' Behavior? Evidence from Sales Managers

29 Pages Posted: 20 Mar 2013 Last revised: 11 Jan 2019

See all articles by Alan Benson

Alan Benson

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: August 14, 2014

Abstract

This paper explores intermediary agency problems, specifically the use and misuse of authority and incentives in organizational hierarchies. Through a principal-supervisor-agent model inspired by sales settings, I propose organizations delegate authority over salespeople to frontline sales mangers because they can decompose performance measures into ability and luck. The model yields the result that managers on the cusp of a quota have a unique personal incentive to retain and adjust quotas for poor performing subordinates, permitting me to isolate an interest of a manager from the firm. I parametrically estimate the model using detailed microdata from 244 firms that subscribe to a "cloud"-based service for processing sales and compensation. I estimate 13-15% of quota adjustments and retentions among poor performers are explained by the managers' unique personal interest in meeting a quota. I use agency theory to discuss how firms mitigate the cost of gaming.

Keywords: Agency Theory, Gaming, Incentives, Sales, Compensation

JEL Classification: J33, D22, L21, M51, M52

Suggested Citation

Benson, Alan, Do Agents Game Their Agents' Behavior? Evidence from Sales Managers (August 14, 2014). Benson, Alan. "Do Agents Game Their Agents' Behavior? Evidence from Sales manages." Journal of Labor Economics, 33(4): 863-90. , Available at SSRN: https://ssrn.com/abstract=2235922 or http://dx.doi.org/10.2139/ssrn.2235922

Alan Benson (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://https://www.alanmbenson.com/

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
6,596
Abstract Views
14,565
Rank
2,089
PlumX Metrics