CHEATING IN CONTESTS

Wherever competition is used to motivate a desirable activity or productive effort it may also motivate undesirable and therefore prohibited behavior—that is, cheating—that the organizer of the contest attempts to police. For example, when workers compete for promotion, bonuses, or other rewards, they may misrepresent their output (i.e., commit fraud) or increase their output by unacceptable means (e.g., violate regulations). We show how the extent of cheating is determined by the payoffs at stake in the contest, the random component of output, probability of cheating being detected, number of contestants, and the penalty associated with being found to have cheated. We find that while greater enforcement reduces cheating, it may also reduce productive effort. We also identify how two particular aspects of enforcement, the awarding of default victories and use of correlated rather than independent audits, affect cheating behavior. (JEL J33, K42)     

ECONOMIES OF SCALE IN BANKING,INDETERMINACY, AND MONETARY POLICY

This paper investigates economies of scale (ES) in financial intermediation as a source of equilibrium indeterminacy. Financial intermediation is embedded into a standard flexible‐price monetary model, and provides deposits (inside money) that substitute with currency to purchase consumption. The results indicate that equilibrium indeterminacy does not depend on a large degree of ES in intermediation nor a large intermediation sector, but on monetary policy and the determination of nominal interest rates. Monetary policies not targeting nominal rates allow for indeterminacy to arise for any positive degree of ES, while policies targeting nominal rates eliminate indeterminacy for all degrees of ES. (JEL C62, E44, E52)     

VELOCITY FUTURES MARKETS: DOES THE FED NEED A STRUCTURAL MODEL?

Previous proposals suggesting monetary policy makers target private-sector forecasts have been shown to be problematic. As policy becomes more effective, private-sector forecasts become less informative. Under perfect stabilization private-sector forecasts provide no useful guidance to monetary policy makers about economic shocks. We illustrate a way around this circularity problem by creating a policy futures market linked to the ratio of the (realization of the) policy goal for next period and the current instrument setting. The implication is that extensive information gathering is unnecessary, weakening the argument that central banks need a structural model to conduct policy. (JEL E52, E44, E42 )     

The Cognitive-Behavioural Approach with Depressed Clients

Correspondence to Dr Michael Seott, Liverpool Personal Service Society, 34, Stanley Street, Liverpool L1 6AN Summary The recent cognitive revolution in psychology has meant thatan individual's behaviour is now rarely viewed in simple behaviouristterms as solely a product of rewards and punishments, but isseen as influenced by the individual's own, often idiosyncratic,view of their situation. This new paradigm has enabled the developmentof highly structured and usually brief interventions in manyareas of individual emotional problems. This paper describes Individual and Group Cognitive Therapywith depressed clients and cites two recent outcome studies.The contribution of Cognitive-Behaviour Therapy (CBT) to thisarea of emotional distress is noted with the caveat that itseffectiveness has been more thoroughly studied in this areathan in others.