Optimal sales force diversification and group incentive payments

In this research, we show that the interaction between territory allocation and sales force compensation–two key drivers of sales productivity–strongly affects the firm's profitability. We analyze an agency-theoretic model that jointly considers the degree of negative or positive correlation across territory outcomes, differences in territories' sales potentials, the agency problem with risk-averse salespeople, and the availability of both own-territory compensation elements, such as commission, and elements dependent on the performance of others, such as group commissions or tournaments.