Julio J. Rotemberg
Harvard University – Business, Government and the International Economy Unit; National Bureau of Economic Research (NBER)
NBER Working Paper No. w15975
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.