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Optimal Incentive Contract for Sales Team with Loss Aversion Preference

1,2,3, 4 and 1,3,*
School of Business, Hunan University of Science and Technology, Xiangtan 411201, China
School of Economic Mathematics, Southwestern University of Finance and Economics, Chengdu 611130, China
Hunan Engineering Research Center for Intelligent Decision Making and Big Data on Industrial Development, Xiangtan 411201, China
School of Geosciences and Info-Physics, Central South University, Changsha 410083, China
Author to whom correspondence should be addressed.
Symmetry 2019, 11(7), 864;
Received: 14 May 2019 / Revised: 19 June 2019 / Accepted: 20 June 2019 / Published: 3 July 2019
PDF [2402 KB, uploaded 3 July 2019]


When manufacturing enterprises employ sales team (or multiple salesmen) to sell products, there is asymmetric information such as the ability and efforts salesmen. Enterprises can use contracts to incentivize salesmen to work hard to maximize their profits. Assuming that market demand is sensitive to effort, and the salesman can exploit the market by increasing effort, a multi-agent model is established for the case of symmetrical information and asymmetrical information, in which the sales team has a loss aversion preference. In this multi-agent model, the agents’ utility function is non-concave and cannot be solved by traditional methods. We use a backward stochastic differential equation (BSDE) to represent agents’ contract through the martingale representation theorem and use the stochastic optimal control and matrix method to obtain the explicit solution of the optimal contract. Based on the conclusions of the research, an empirical analysis is made on the sales team of an enterprise. View Full-Text
Keywords: sales team; information symmetry; moral hazard; loss aversion; BSDE; HJB equation sales team; information symmetry; moral hazard; loss aversion; BSDE; HJB equation

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Li, C.; Cheng, S.-J.; Cheng, P.-F. Optimal Incentive Contract for Sales Team with Loss Aversion Preference. Symmetry 2019, 11, 864.

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