Why Do Salespeople Spend So Much Time Lobbying for Low Prices?

Duncan I. Simester · Juanjuan Zhang

39 citations0/0 files storedMarketing Science

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Supply Chain and Inventory Management Merger and Competition Analysis Consumer Market Behavior and Pricing

Abstract

In business-to-business settings a company's sales force often spends considerable time lobbying internally for authorization to charge lower prices. These internal lobbying activities are time consuming, and divert attention from other tasks, such as interacting with customers. We explain why internal lobbying activities serve an important role. They help the firm elicit truthful reporting of demand information from the sales force. As a result, it may be profitable for the firm to require lobbying (and make the requirement onerous), even though lobbying is a nonproductive activity that creates an additional administrative burden and imposes a deadweight loss.

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References

2002The Theory of Incentives 2001The Theory of Incentives: The Principal-Agent Model 2000The Dark Side of Internal Capital Markets: Divisional Rent‐Seeking and Inefficient Investment 1985The Salesperson as Outside Agent or Employee: A Transaction Cost Analysis 1988Employment Contracts, Influence Activities, and Efficient Organization Design 1985Salesforce Compensation Plans: An Agency Theoretic Perspective 1992O rganizational P rospects , I nfluence C osts , and O wnership C hanges 2010Sales, Marketing, and Research-and-Development Cooperation Across New Product Development Stages: Implications for Success

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