Working Paper: NBER ID: w15975
Authors: Julio J. Rotemberg
Abstract: In a search model, prospects encounter salespeople who can try to persuade them. Persuasive messages can increase the utility of buying or increase the cost of not buying. The latter reduces welfare. Equilibria where only some salespeople make a persuasive effort often exist. Salespeople vary in their empathy, and choose their jobs accordingly. When all prospects are persuadable, a negative correlation between empathy and sales suggests that persuasion increases the cost of not buying. When only some are, messages that increase the utility of purchasing can reduce welfare. They can also lead to a negative correlation between empathy and sales.
Keywords: persuasion; empathy; sales; consumer welfare
JEL Codes: D64; D83; M31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Persuasive techniques (C92) | Increase utility of purchasing products (D11) |
| Persuasive techniques (C92) | Increase costs associated with not purchasing (J32) |
| Increase costs associated with not purchasing (J32) | Reduced welfare (I38) |
| Salesperson empathy (M31) | Sales outcomes (L14) |
| Salesperson efforts (L81) | Consumer welfare (D69) |
| Empathy (Y60) | Sales techniques (M31) |
| Empathetic salespeople (D16) | Avoid harmful techniques (C90) |
| Avoid harmful techniques (C90) | Lower sales (D49) |
| Empathetic salespeople (D16) | Focus on profitable customers (L21) |
| Focus on profitable customers (L21) | Negative correlation between empathy and sales (D91) |