Kinks as Goals: Accelerating Commissions and the Performance of Sales Teams

We study the performance of small retail sales teams facing an incentive scheme that includes both a lump sum bonus and multiple accelerators (kinks where the piece rate jumps upward). Consistent with standard labor supply models, we find that the presence of an attainable bonus or kink on a work-da...

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Bibliographic Details
Published in:NBER Working Paper Series 2021-02
Main Authors: Kuhn, Peter J, Yu, Lizi
Format: Article
Language:English
Subjects:
Economic theory
Online Access:Get full text
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Summary:We study the performance of small retail sales teams facing an incentive scheme that includes both a lump sum bonus and multiple accelerators (kinks where the piece rate jumps upward). Consistent with standard labor supply models, we find that the presence of an attainable bonus or kink on a work-day raises mean sales, and that sales are highly bunched at the bonus. Inconsistent with those models, we find that teams bunch at the kinks instead of avoiding them. Teams’ responses to the kinks are consistent with models in which the kinks are perceived as symbolic rewards, or where kinks induce a sufficient amount of loss aversion. Since bunching at both the target and kinks is strongest in larger, more experienced teams, we argue that these reference points are best understood as shared goals, used by teams to motivate and co-ordinate their members.
ISSN:0898-2937
DOI:10.3386/w28487