Design of contracts for pharmaceutical marketing service outsourcing withasymmetric information
DOI:
Author:
Affiliation:

Clc Number:

F224

Fund Project:

  • Article
  • |
  • Figures
  • |
  • Metrics
  • |
  • Reference
  • |
  • Related
  • |
  • Cited by
  • |
  • Materials
  • |
  • Comments
    Abstract:

    In order to reduce the marketing cost,some pharmaceutical firms outsource their marketing services to CSO (contract sales organization) . The pharmaceutical firm pays CSO based on sales volume to incentivize its non-contractible marketing effort. However,the sales volume is affected by the pricing decision of the pharmaceutical firm,which makes CSO face the moral hazard of increasing price by the pharmaceutical firm. In addition,the pharmaceutical marketing difficulty may be the private information of the CSO,which will lead to adverse selection. When the pharmaceutical firm outsources marketing business to multiple CSOs,the pricing decision of the pharmaceutical firm has a common impact on the sales volume of the CSOs as the sales price is the same in different markets. The incentive contract based on relative performance can filter out the common shock effect on the output of agents,thereby effectively motivating the agents. The different effectiveness between incentive contracts based on relative and absolute performance is compared. It is shown that the incentive contract based on relative performance dominates the contract based on absolute performance when the pharmaceutical marketing difficulty is symmetrical information. Moreover,the incentive contract based on relative performance can achieve the first-best marketing effort and profit. Further,neither incentive contract can obtain the first-best marketing effort and profit when the pharmaceutical marketing difficulty is asymmetrical information. The numerical analysis further shows that a higher market price sensitivity or a lower difference between the high-type and low-type pharmaceutical marketing difficulty is more beneficial to the incentive contract based on relative performance.

    Reference
    Related
    Cited by
Get Citation
Share
Article Metrics
  • Abstract:
  • PDF:
  • HTML:
  • Cited by:
History
  • Received:
  • Revised:
  • Adopted:
  • Online: October 25,2021
  • Published:
You are the th visitor Address:Room 908, Building A, 25th Teaching Building, Tianjin University, 92 Weijin Road, Nankai District, Tianjin Postcode:300072
Telephone:022-27403197 Email:jmsc@tju.edu.cn