2009), “Compensation and Peer Effects in Competing Sales Teams,” Working paper

Abstract. We use Chinese cosmetic sales transaction data to examine how compensation and firm boundaries influence worker productivity spillovers and competition strategies. Implementing improved methodology, we find strong peer effects among workers, demonstrating important new findings. First, we find spillovers are positive under team-based compensation while negative under individual-based compensation. Second, we find peer effects across firm boundaries that depend on compensation system. Third, we find strategic price discounting and customer focus in response to high-ability peers within individual-based counters. Our results suggest that heterogeneity in worker productivity enhances team performance under team-based compensation while hurting individual-based firms. 1 Tat Y. Chan is Associate Professor of Marketing, Jia Li is a doctoral student in Marketing, and Lamar Pierce i