Abstract:
An analytical model for risk taking tendencies in salesforce compensation arrangements is
developed that takes into account fixed salary levels and commission rates. The model
demonstrates that a salesperson's preference for a particular compensation contract is
contingent on his/her anticipated level of total compensation (fixed salary plus commissionbased
compensation) and his/her degree of loss aversion. The conceptualisation differs from
known models and is based on an integration of agency and prospect theory.
