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| Author: | Zhao, H. |
| Title: | Incentive-based compensation to advertising agencies: A principal-agent approach |
| Journal: | International Journal of Research in Marketing
2005 : SEP, VOL. 22:3, p. 255-275 |
| Index terms: | advertising advertising agencies incentives compensation agency theory |
| Language: | eng |
| Abstract: | Based on the agency theory, studied is the optimal incentive-based compensation contract supposed to be offered to the advertising agency by the advertiser. It is shown that, when the overall risk level (here as: r-lvl.) is moderate, more incentive (as: inc.) should be used (as: s-b-u.) as the r-lvl. increases. However, as the r-lvl. is sufficiently high, more fixed fees and less inc. s-b-u. In addition, it is found that there is a roughly N-shaped relationship btw. inc. rate and advertising budget. Specifically, for either a small or large budget, more inc. s-b-u., and for a moderate budget, less inc. s-b-u. |
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