IMA Journal of Mathematics Applied in Business & Industry (1988/9) 2, 17-23 Sales Commission for Multiproduct Sales Forces

In the early 1970s several papers computed commission rates with the criterion that they be chosen so that the optimal time allocations for salesmen were the same as the optimal times for the firm. Recent papers have considered a principal-agent model for a single-product firm in which the firm sets commission rates knowing how the sales force will allocate time for any given rates. These papers assume that the probability distribution of sales is a function of sales effort. In this paper, we also consider a principal-agent model, but for deterministic sales of a multiproduct firm. A computational procedure is illustrated. 1