Black sheep and walls of silence

In this paper we analyze the frequently observed phenomenon that (i) some members of a team (“black sheep”) exhibit behavior disliked by other (honest) team members, who (ii) nevertheless refrain from reporting such misbehavior to the authorities (they set up a “wall of silence”). Much cited examples include hospitals and police departments. In this paper, these features arise in equilibrium. An important ingredient of our model are benefits that agents receive when cooperating with each other in a team. Our results suggest that teams in which the importance of these benefits varies across team members are especially prone to the above-mentioned phenomenon

Black sheep or scapegoats? Implementable monitoring policies under unobservable levels of misbehavior

An authority delegates a monitoring task to an agent. Thereby, it can observe the number of detected offenders but not the monitoring intensity chosen by the agent or the resulting level of misbehavior. We provide a necessary and sufficient condition for the implementability of monitoring policies. When several monitoring intensities lead to an observationally identical outcome, only the minimum of these is implementable, which can lead to underenforcement. A comparative-statics analysis reveals that increasing the punishment can undermine deterrence, since the maximal implementable monitoring intensity decreases. When the agent is strongly intrinsically motivated to curb crime, our results are mirrored, and only high monitoring intensities are implementable. Then, higher monetary rewards for detections lead to a lower monitoring intensity and to a higher level of misbehavior.Berno Buechel and Gerd Muehlheusse

Sequential location games

We study location games where market entry is costly and occurs sequentially, and where consumers are nonuniformly distributed over the unit interval. We show that for certain classes of densities, including monotone and - under some additional restrictions - hump-shaped and U-shaped ones, equilibrium locations can be determined independently of when they are occupied. Our analysis reveals a number of peculiarities of the uniform distribution. Extensions of the model allow for price competition and advertisement in media markets, winner-take-all competition, trade-offs between profits in the short and the long run, and firms operating multiple outlets.Simon Loertscher, Gerd Muehlheusse

How often should you open the door? Optimal monitoring to screen heterogeneous agents

This paper shows that monitoring too much a partner in the initial phase of a relationship may not be optimal if the goal is to determine his loyalty to the match and if the cost of ending the relationship increases over time. The intuition is simple: by monitoring too much we learn less on how the partner will behave when he is not monitored. Only by giving to the partner the possibility to mis-behave he might be tempted to do it, and only in this case there is a chance to learn his type at a time where separation would be possible at a relatively low cost

Repeated selection with heterogeneous individuals and relative age effects

Abstract not availableHerbert Dawid, Gerd Muehlheusse