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)     

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)     

INCENTIVES, PREDESTINATION AND FREE WILL

Without wholeheartedly endorsing Max Weber's views on Protestantism and economic growth, we present a model formalizing his claim that belief in predestination was a component in economic development. Our model suggests that belief in predestination is more effective when heterogeneity of beliefs is high, when the desire for homogeneity is high, or when accurate signals about ethics are important. Using the General Social Survey, we find that Protestants generally and Presbyterians in particular exhibit a stronger connection between individual and group behavior and between worldly success and church attendance. ( JEL A13, Z10)     

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)     

INCENTIVES FOR DISHONESTY: AN EXPERIMENTAL STUDY WITH INTERNAL AUDITORS

We conduct an experiment with professional internal auditors and evaluate their performance and objectivity, measured as the extent to which they truthfully report the performance of other participants in a real-effort task. In line with our hypotheses, we find that incentive-based compensation increases dishonest behavior: competitive incentives lead to under-reporting of other participants' performance, while collective incentives lead to over-reporting of performance. We replicate these results with a student sample. In addition, we find that moving from an environment with objective performance evaluation toward a peer evaluation scheme reduces performance among internal auditors, but not among students.(JEL C93, M42, M52)     

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.     

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.     

PRICE PREDICTION ERRORS AND REAL ACTIVITY: A REASSESSMENT

Rational expectations, natural-rate macro-models in which aggregate demand disturbances affect the real sector through price prediction errors, while powerful and tractable analytical tools, are often perceived to be of questionable empirical relevance. This paper reexamines the empirical role of price prediction errors in determining the level of real aggregate activity. The approach is distinguished by accounting for aggregate supply-side disturbances and by more careful treatment of natural rates. Contrary to some previous studies, we find considerable empirical support for the hypothesis that demand-driven price level surprises are positively and significantly correlated with aggregate real economic activity.     

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.     

CONTEXTUALIZED ASSESSMENT WITH BATTERED WOMEN: STRATEGIC SAFETY PLANNING TO COPE WITH MULTIPLE HARMS

Given the prevalence of domestic violence and the likelihood that many victims will not receive services from specialized domestic violence providers, this article provides a framework for contextualized assessment that can be used by generalist practitioners. Drawing from stress and coping theory, the authors discuss the relevance of assessing appraisals and emotional responses within the context of environmental and individual risk and protective factors. Through an illustrative case assessment, the authors describe the contextualized assessment process and its ramifications for strategic safety planning.     

CONTEXTUALIZED ASSESSMENT WITH BATTERED WOMEN: STRATEGIC SAFETY PLANNING TO COPE WITH MULTIPLE HARMS

Given the prevalence of domestic violence and the likelihood that many victims will not receive services from specialized domestic violence providers, this article provides a framework for contextualized assessment that can be used by generalist practitioners. Drawing from stress and coping theory, the authors discuss the relevance of assessing appraisals and emotional responses within the context of environmental and individual risk and protective factors. Through an illustrative case assessment, the authors describe the contextualized assessment process and its ramifications for strategic safety planning.     

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.     

EFFICIENCY WAGES AND SUBJECTIVE PERFORMANCE PAY

This paper studies optimal relational contracts in motivating workers in a market setting. We find that labor markets with higher turnover costs will use more subjective performance pay and less efficiency wages and that in those markets, the total wage payment is lower and the equilibrium employment level is higher. Surprisingly, under certain conditions, an increase in turnover costs leads to higher social welfare. Incorporating workers' search costs, we show that wages are procyclical in booms and are either rigid or countercyclical during recessions. The predictions of the model are consistent with some empirical evidence. ( JEL D82, J33, J41, J63)     

CONSUMER SEARCH COSTS AND MARKET PERFORMANCE

We conduct laboratory markets to evaluate the effects of consumer search costs on market performance. The primary research goal is to assess the behavioral relevance of Diamond's [1971] paradoxical conclusion that the injection of a small consumer search cost alters the equilibrium price prediction from competitive to monopoly levels. Although monopoly prices are not consistently observed, we find that search costs do tend to raise prices. Additional experimentation indicates that below-monopoly prices are not explained by buyer avoidance of high-pricing sellers, but that prices increase as search costs are raised.     

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)     

THE EFFECTS OF FINANCIAL AND RECOGNITION INCENTIVES ACROSS WORK CONTEXTS: THE ROLE OF MEANING

We manipulate workers' perceived meaning of a job in a field experiment and interact meaning of work with both financial and recognition incentives. Results show that workers exert more effort when meaning is high. Money has a positive effect on performance that is independent of meaning. In contrast, meaning and recognition interact negatively. Our results provide new insights into the stability of incentive effects across important work contexts. They also suggest that meaning and worker recognition may operate via the same motivational channel. (JEL C93, J33, M12, M52)