Quantitative Marketing and Economics

, Volume 15, Issue 1, pp 57–84 | Cite as

Strategic compliments in sales

Article
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Abstract

Salespersons often spend time and money giving prospective buyers compliments such as kind words, meals and gifts. Though prior research has shown that compliments will influence a prospective buyer’s decision, it is unknown the extent to which salespersons should make these investments. In this paper, we develop an analytical model to examine how seller and buyer characteristics affect the equilibrium provision of compliments by the seller. We establish that the optimal magnitude of compliments is non-monotonic in the buyer’s sensitivity to compliments. We identify conditions for when a seller of a high-quality product will offer greater (or lesser) compliments than a seller of a lower quality product. We show that, under certain conditions, an uninformed buyer earns greater utility than a buyer who knows the quality of the seller’s product. The findings have implications for sellers in their choice of compliments and buyers in the inferences they draw from the compliments received.

Keywords

Game theory Sales Signaling Compliments 

JEL Classification

M31 D03 C70 

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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.University of WashingtonSeattleUSA

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