Article ID Journal Published Year Pages File Type
9719009 International Journal of Research in Marketing 2005 21 Pages PDF
Abstract
Using the agency theory, we study the optimal incentive-based compensation contract that the advertiser should offer to the advertising agency. We show that, when the overall risk level is moderate, more incentive should be used as the risk level increases. However, as the risk level is sufficiently high, more fixed fees and less incentive should be used. We also find that there is a roughly N-shaped relationship between incentive rate and ad budget. Specifically, for either a small or large budget, more incentive should be used; and for a moderate budget, less incentive should be used.
Related Topics
Social Sciences and Humanities Business, Management and Accounting Marketing
Authors
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