This thesis is composed of three essays. The first essay studies price setting behavior by sales agents of an electrical wholesale company following a change in their compensation contract. Originally, agents received a fixed share of the revenues from their sales. Under the new scheme, commission rates increase with the price-cost margin of the sale. The reform was enacted at different times in different stores, enabling measurement of its impact by difference-in-differences. Commissions on 95% of goods increase but agents do not raise prices on all these products. Despite the stronger financial incentives, the price of 18% of goods decreases and increases for the rest, suggesting agents reallocate effort among products.
The second essay explores the importance of employee-customer relationships as an incentive and price discriminating tool. The model assumes that customers differ in their valuations and in their probability of returning (q). The distribution of valuations and q are known, and in each interaction the sales agent exerts effort to learn the customer’s valuation. The agent earns a commission based on the client’s payment and has full pricing flexibility. The two main insights are that, when the valuation is unknown, effort is increasing in q and the effect of a commission raise has an inverted-U relation with customers’ probability of returning. Prices should be increasing in effort. Using administrative data from an electrical company, I show evidence supporting the theoretical insights.
The third essay analyses the determinants of teachers’ occupational choice and how changes in financial incentives modify individuals’ occupation choices. Among college graduates, teachers have both low average Armed Forces Qualification Test scores (AFQT) and high average risk aversion. Using a dynamic optimization model with unobserved heterogeneity, we find that were it possible to make teacher compensation mimic the return to skills and riskiness of the non-teaching sector, overall compensation in teaching would increase. Moreover, such a shift would substantially reduce the utility of many current teachers, making the process of reform challenging. Importantly, the results of policy exercises are very sensitive to the degree of heterogeneity included in the model.
| Identifer | oai:union.ndltd.org:bu.edu/oai:open.bu.edu:2144/49066 |
| Date | 08 July 2024 |
| Creators | Palacios, Maria Dolores |
| Contributors | Lang, Kevin |
| Source Sets | Boston University |
| Language | en_US |
| Detected Language | English |
| Type | Thesis/Dissertation |
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