Commentary on “Dynamic Incentives in Sales Force Compensation”

We show that the Hamilton-Jacobi-Bellman (HJB) equation for the salesperson’s problem is not correct because of the effect of a positive discount factor for the infinite-horizon risk-sensitive control. As a result, their analyses and insights are incorrect. We present the correct HJB equation for the salesperson’s problem, which is a partial differential equation. Thus, further investigation on the correct solutions is needed to better understand the problem.

History: K. Sudhir served as the senior editor for this article.

Funding: X. Kong acknowledges financial support from the Natural Science Foundation of China [Grants 72101243 and 72091212/72091210] and the Fundamental Research Funds for the Central Universities [Grant WK2040000033]. The research of Y. Yu is partially supported by the Hong Kong Research Grants General Proposal Fund [Grant 9043432], CityU [Grants 7005793 and 7005591], and the Laboratory for AI-Powered Financial Technologies.