TY  - UNPD
A1  - Inderst, Roman
T1  - Misselling (financial) products: the limits for internal compliance
T2  - Working paper series / Institute for Monetary and Financial Stability ; 35
N2  - This paper considers a firm that has to delegate to an agent, such as a mortgage broker or a security dealer, the twin tasks of approaching and advising customers. The main contractual restriction, in particular in light of related research in Inderst and Ottaviani (2007), is that the firm can only compensate the agent through commissions. This standard contracting restriction has the following key implications. First, the firm can only ensure internal compliance to a "standard of sales", in terms of advice for the customer, if this standard is not too high. Second, if this is still feasible, then a higher standard is associated with higher, instead of lower, sales commissions. Third, once the limit for internal compliance is approached, tougher regulation and prosecution of "misselling" have (almost) no effect on the prevailing standard. Besides having practical implications, in particular on how to (re-)regulate the sale of financial products, the novel model, which embeds a problem of advice into a framework with repeated interactions, may also be of separate interest for future work on sales force compensation. JEL Classification: D18 (Consumer Protection), D83 (Search; Learning; Information and Knowledge), M31 (Marketing), M52 (Compensation and Compensation Methods and Their Effects).
T3  - Working paper series / Institute for Monetary and Financial Stability - 35 
KW  - Agency-Theorie
KW  - Vergütung
KW  - Verbraucherschutz
Y1  - 2009
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/7322
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-72951
UR  - http://www.imfs-frankfurt.de/fileadmin/user_upload/pdf/WP_2009_35_Inderst.pdf
N1  - Published in: Economics Letters, 2010, vol. 106, issue 1, pp. 35-37
ER  -