INCENTIVES AND BEHAVIOR IN ENGLISH, DUTCH AND SEALED-BID AUCTIONS

The Pareto optimality and price behavior of English and Dutch oral auctions, and First-Price and Second-Price sealedbid auctions are compared under various procedures for assigning valuations among cash motivated bidders. The Vickrey propositions with respect to the mean and variance of prices under the English, Dutch and Second-Price auctions are not falsified by the data. Individual behavior and prices in the First-Price auction deviates considerably from Vickrey's Nash postulate. Behaviorly, the English and Second-Price auctions appear to be isomorphic, but the Dutch and First-Price auctions may not be isomorphic.     

CITATIONS AND INCENTIVES IN ACADEMIC CONTESTS

I consider a contest between scholars on the basis of three popular indices of citation. There exist equilibria in which there are more and better-quality papers in the total citations contest than in the h-index contest. In some cases, the total citations contest yields the same quality of papers but more papers than the Euclidean contest. As the cost of writing a paper increases,the h-index is inferior to the total citations index in both the quality and quantity of papers. This result is partly driven by how the number of papers constrains how the h-index counts citations. (JEL D72)     

PRODUCT BUNDLING AND INCENTIVES FOR MERGERS AND STRATEGIC ALLIANCES

This paper analyzes firms' choice of a merger or a strategic alliance in bundling their products with other complementary products. Tying two products of unequal value makes them equally valuable as they become inseparable for purchase. Consequently, firms can charge a higher price for the bundled products than before. If foreclosure is not the main purpose of bundling, firms would prefer strategic alliances to mergers because mergers only intensify competition by internalizing the complementarities of two products. In equilibrium, bundling occurs only through strategic alliances. (JEL L4, L11, L13, L23)     

GUILTY CONSCIENCE AND INCENTIVES WITH PERFORMANCE ASSESSMENT ERRORS

This study examines the effects of guilty conscience on incentive in the situation where an agent performance assessment has errors. There are two types of assessment error: undervaluation and overvaluation. In overvaluation, agents will not correct the assessment because their wages would then decrease. Although agents will want their undervaluation corrected, principals will not correct the error due to increased wage cost. Hence, correcting errors is complicated. However, this type of selfish behavior by agents and principals produces feelings of guilt, particularly when others trust them. In this situation, a high incentive is desirable for conscientious people with a strong sense of guilt or for nonconscientious people who do not feel guilt, but it is undesirable for intermediate‐type people who are conscientious only to a certain extent. (JEL D03, D82, J41)     

VOUCHERS,PUBLIC SCHOOL RESPONSE,AND THE ROLE OF INCENTIVES: EVIDENCE FROM FLORIDA

This paper analyzes the incentives and responses of public schools in the context of an educational reform. Much of the literature studying the effect of voucher programs on public schools has looked at the effect on student and mean school scores. This paper tries to go inside the black box to investigate some of the ways in which schools facing the Florida accountability‐tied voucher program behaved. Schools getting an “F” grade for the first time were exposed to the threat of vouchers, but did not face vouchers unless and until they got a second “F” within the next 3 years. In addition, “F,” being the lowest grade, exposed the threatened schools to stigma. Exploiting the institutional details of this program, I analyze the incentives built into the system and investigate the behavior of the threatened public schools facing these incentives. There is strong evidence that they did respond to incentives. Using highly disaggregated school‐level data, a difference‐in‐differences estimation strategy as well as a regression discontinuity (RD) analysis, I find that the threatened schools tended to focus more on students below the minimum criteria cutoffs rather than equally on all. Second, consistent with incentives, the threatened school improvements were, by far, the largest in writing. These results are robust to controlling for differential preprogram trends, changes in demographic compositions, mean reversion, and sorting. These findings have important policy implications. (JEL H4, I21, I28)     

CORRUPTION,TAX EVASION AND THE ROLE OF WAGE INCENTIVES WITH ENDOGENOUS MONITORING TECHNOLOGY

The importance of high salaries to circumvent bureaucratic corruption has been widely recognized in the policy debate. Yet, there appears to be much reluctance when it comes to the implementation. In this paper, we argue that deterring corruption through wage incentives may become prohibitively expensive that the government finds it optimal to accept higher net revenues at the expense of honesty. Deviating from the existing literature, we set an endogenous monitoring technology that allows us to capture the dual role of auditing, as a complement with and as a substitute for wage incentives to deter bribery. We find that the government is better‐off either completely eliminating corruption or accepting corruption by offering wages lower than the market wage. Offering public wage premium that does not deter bribery is suboptimal. When it is optimal to deter bribery, the government can do it either through wage incentives or monitoring. The role of wage incentives decreases in societies with higher level of dishonesty. (JEL D73, H26, J33, J41)     

RIGHT-TO-WORK LAWS AND FREE RIDING

Many economists argue that state right-to-work laws, by disallowing union shops, encourage free riding and thus diminish union viability. Others counter that right-to-work laws are not enforced and that they represent local attitudes and employee characteristics which would encourage free riding in any me. We find that when other factors which affect free riding are taken into account, the marginal impact of right-to-work laws remains significant, although of a smaller magnitude than that found in previous bivariate studies.     

FREE RIDING, SHIRKING, AND TEAM PRODUCTION IN LEGAL PARTNERSHIPS

A model of team production in legal partnerships, based on the Alchian-Demsetz theory of the firm, is developed and tested empirically in this paper. An estimate of the optimal law-firm size for controlling costly free riding behavior in partnerships is derived. Finally, some survivorship evidence on law-firm sizes, some comparisons of legal and medical group practices, and some thoughts on the role of the sole proprietor in the market for legal services are presented.     

BANKS,FREE BANKS,AND U.S. ECONOMIC GROWTH

The “Federalist financial revolution” may have jump‐started the U.S. economy into modern growth, but the Free Banking System (1837–1862) did not play a direct role in sustaining it. Despite lowering entry barriers and extending banking into developing regions, we find in county‐level data that free banks had little or no effect on growth. The result is not just a symptom of the era, as state‐chartered banks seem to have strong and positive effects on manufacturing and urbanization. (JEL G21, N21, O43)     

LARGE MONETARY INCENTIVES AND THEIR EFFECT ON MAIL SURVEY RESPONSE RATES

The effect of various large monetary incentives was examinedin a mail survey of owners of small construction subcontractingcompanies. The sample was randomly divided into seven groups,each of which received either a different monetary amount enclosedwith the first mailing ($1 cash, $5 cash, $5 check, $10 check,$20 check, or $40 check) or an offer of a $50 check to be sentonce the questionnaire was returned. These groups were comparedagainst each other and against a control group that did notreceive an incentive. Three follow-up mailings were sent tothe nonrespondents in each group. The results indicate that$1 significantly increased the response rate over the no incentivecontrol condition regardless of the number of mailings. Theresponse rate also increased significantly as the incentiveamount increased from $1 to $5 and from $5 to $20. There wasa nonsignificant difference in response rate between the $5check and $5 cash groups. The promise of $50 did not resultin a significantly higher response rate than the control group.Discussion includes a cost-benefit analysis of the incentives,as well as a section about the increased "favorability" of respondentstoward the survey sponsor within the large incentive groups.     

PROMOTIONS AS WORK INCENTIVES

Why do professional partnerships like law firms, accounting practices, and management consulting groups to name a few, rely almost exclusively on promotions for incentives and do not typically use incentive pay to motivate their associates? We compare three schemes (relative-input-based piece rates, tournaments with monetary prizes, and tournaments with promotions as prizes) within an environment characterized by group production and double moral hazard induced by possible wealth constraints on the supervisors. We find that the difficulty in implementing promotion tournaments is possibly an important reason for the existence of firms.     

CIVIL ASSET FORFEITURE,CRIME, AND POLICE INCENTIVES: EVIDENCE FROM THE COMPREHENSIVE CRIME CONTROL ACT OF 1984

The 1984 federal Comprehensive Crime Control Act (CCCA) included a provision that permitted local law enforcement agencies to acquire up to 80% of the proceeds derived from civil asset forfeitures obtained in joint operations with federal authorities. We investigate how this rule governing forfeited assets influenced crime and police incentives by taking advantage of pre‐existing differences in state‐level civil asset forfeiture law and the timing of the CCCA. We find that after the CCCA was enacted crime fell about 17% in places where the federal law allowed police to retain more of their seized assets than state law previously allowed. (JEL K42, K15, H76)     

CHARITIES, NO; LOTTERIES, NO; CASH, YES: MAIN EFFECTS AND INTERACTIONS IN A CANADIAN INCENTIVES EXPERIMENT

The effects on response rates to mail surveys of prepaymentcash incentives, charitable donations, and the chance to wina lottery prize are examined in a true experimental design.A survey on environmental issues was conducted during the fallof 1994 among 3,088 households drawn from the Grand River watershedregion of southwestern Ontario, Canada. The 20-cell incentivesexperiment crossed three levels of prepaid monetary cash incentive($2, $5, and $10) with a control group (no cash incentive),plus the offer to make a charitable donation ranging from $2to $10 on behalf of the respondent, or participation in a lotteryfor prizes of $200. The overall response rate to the survey,with three follow-ups, was 70.7 percent with the effects ofthe prepaid cash rewards demonstrated, but not those for thelottery or charitable donations. Logistic regression analysisof response rate supports a main effects model for cash incentivesbut does not support either of two alternative models for maineffects of the lottery and charitable donations or interactions.Further analysis demonstrates a pattern of earlier responseas a result of prepaid incentives. The findings are discussedin terms of their cost-benefit implications and with respectto conceptualizations of respondents' motives for completingmail questionnaires.     

THE INCENTIVES TO ORGANIZE AND DEMAND REGULATION: TWO ENDS AGAINST THE MIDDLE

A consumer versus business view of regulation frequently is too simplistic. Producers as a group may also be able to obtain rents from non-consumer surplus sources, and therefore may have relatively strong aggregate incentives to organize and seek favorable regulation as compared to consumers' incentives to avoid such regulation. This occurs in an increasing cost industry where producers purchase inputs whose supply curves are not infinitely elastic. The rents obtained by producers through regulatorily initiated output restrictions then include transfers from resource suppliers as well as from consumers, and exceed the potential losses consumers face.     

MEASURING EFFORT INCENTIVES IN A TOURNAMENT WITH MANY PARTICIPANTS: THEORY AND APPLICATION

This article provides an empirical measure to compare incentive effects of different tournament structures. Although there have been many theoretical attempts to analyze incentive effects of a tournament competition, empirical applications are limited as the provided conditions cannot easily be empirically observed. We show that the empirical density of the performance distribution can be used to measure effort incentives in a tournament with many participants. We apply this method to evaluate the grading policy change in the 2008 College Scholastic Ability Test in South Korea. (JEL C70, C51)     

COMPETITIVE INDUSTRY EQUILIBRIUM UNDER UNCERTAINTY AND FREE ENTRY

This paper investigates the properties of industry equilibrium under price uncertainty given free entry and exit. For any form of risk-averse behavior, it is shown that an increase in demand uncertainty (as measured by a mean-preserving spread) increases mean output price and reduces output of firms in long-run equilibrium.     

WILL THEY STAY,OR WILL THEY GO? Sex‐Atypical Work among Token Men Who Teach

This study investigates competing propositions about the effect of workplace sex composition on men who do "women's work," and it contributes to our understanding of how men's experience with sex-atypical work affects workplace sex segregation. Using data on 5,734 secondary and elementary school teachers from the 1990–1992 Schools and Staffing Surveys, I conduct multinomial logistic regression analyses to test hypotheses regarding men's and women's relative likelihood of moving out of teaching and advancing up into administrative positions. Results from these analyses provide no evidence that Kanter's tokenism proposition is generalizable to token men who teach in elementary schools; rather than suffering disadvantages, evidence supports William's "glass escalator" proposition that men enjoy privilege in predominantly female jobs and are more likely than women to be promoted into administrative occupations.     

THE EFFECT OF MONETARY INCENTIVES AND FOLLOW-UP MAILINGS ON THE RESPONSE RATE AND RESPONSE QUALITY IN MAIL SURVEYS

The joint and comparative effects of the use of monetary incentivesand follow-up mailings were examined in a mail survey of suburbanWashington, DC cable television subscribers. Four experimentalgroups received monetary incentives enclosed with the firstmailing only ($0.25, $0.50, $1.00, or $2.00) and three follow-upmailings. These groups were compared with each other and againsta control group that did not receive an incentive. The resultsindicated that the response rate from the first mailing increasedsignificantly as the incentive amount increased from zero to$0.25, and from $0.25 to $1.00. Four mailings without an incentiveproduced a higher response rate than a single mailing with anincentive, but a combination of follow-up mailings and a $1.00or $2.00 incentive produced a significantly higher responserate than an equivalent number of mailings without an incentive. There was some evidence of intertreatment response bias. Largermonetary incentives tended to produce: (1) a greater degreeof effort expended in completing the questionnaires, as measuredby the number of short answers and comments provided, and thenumber of words written, and (2) comments that were more favorabletoward the survey sponsor.     

INCENTIVES AND OUTCOMES IN A STRATEGIC SETTING: THE 3-POINTS-FOR-A-WIN SYSTEM IN SOCCER

I exploit a major structural change that has occurred in world soccer to study the impact of incentives on outcomes in a strategic setting. A game-theoretic model is developed that captures some essential strategic elements of soccer vis-à-vis the number of points awarded to a win. The observable implications of the model are tested using a large data set that spans 30 years and 35 countries. The empirical results support the theoretical model and show that the 3-point system has led to a statistically significant increase in the expected number of goals and a decrease in the fractions of drawn matches. ( JEL C72, L83, C23)