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

Repeated selection with heterogenous individuals and relative age effects

In contexts such as education and sports, skill-accumulation of individuals over time crucially depends on the amount of training they receive, which is often allocated on the basis of repeated selection. We analyze optimal selection policies in a model of endogenous skill formation where, apart from their ability to transform training into skills, individuals also differ with respect to relative age. The latter has been identified by recent empirical research as a major determinant for performance differentials within cohorts. We find that the optimal policy is pro-competitive at later selection stages in the sense of selecting the individuals with the higher skill signals. All eventual corrections due to relative age occur at early stages, where selection is either counter-competitive (i.e. individuals with low skill signals are selected) or even avoided at all. Thereby, the induced selection quality is non-monotone in the degree of ex-ante asymmetry due to relative age. Finally, the (empirical) observation of persistent relative age effects does in general not hint at suboptimal selection policies

Black Sheep or Scapegoats? Implementable Monitoring Policies under Unobservable Levels of Misbehavior

An authority delegates a monitoring task to an agent. It can only observe the number of detected offenders, but neither the monitoring intensity chosen by the agent nor the resulting level of misbehavior. We provide a necessary and sufficient condition for the implementability of monitoring policies. Typically, several monitoring intensities give rise to the same number of detected offenses, and only the minimum of these can be implemented. In equilibrium, a large fraction of potential offenders cannot be deterred

Whistle-Blower Protection: Theory and Experimental Evidence

Whistle-blowing by employees plays a major role in uncovering corporate fraud. Various recent laws aim at improving protection of whistle-blowers and enhancing their willingness to report. Evidence on the effectiveness of such legislation is, however, scarce. Moreover, critics have raised worries about fraudulent claims by low-productivity employees. We study these issues in a theory-guided lab experiment. Easily attainable (“belief-based”) protection indeed leads to more reports, both truthful and fraudulent. Fraudulent claims dilute prosecutors’ incentives to investigate, and thereby hamper deterrence. These effects are ameliorated under more stringent (“fact-based”) protection

The incentive effects of long-term contracts on performance - Evidence from a natural experiment in European Football

The empirical analysis of the impact of long-term contracts on performance is challenging for two reasons: first, it is difficult to get adequate performance measures and second, potentially negative incentive effects of long-term contracts are countervailed by selection effects when workers with higher abilities get longer contracts. We adopt data from professional sports to disentangle selection and incentive effects. The famous Bosman judgement in European football provides a natural experiment as it has led to an exogenous increase in the contract length of players independently of ability, and can hence be used as an instrumental variable to solve the endogeneity problem associated with the contract length. Using data from the German Bundesliga, we find evidence that long-term labor contracts reduce average performance of professional players. In addition, we find that longer contracts influence the distribution of performance asymmetrically in the sense that they increase the probability of poor performances but do not reduce the probabilities of good performances

Competition between market-making Intermediaries

Abstract We introduce capacity constrained competition between market-making intermediaries in a model in which agents can choose between trading with intermediaries, joining a search market or remaining inactive. Recently, market-making by a monopolistic intermediary has been analyzed by Keywords: Market-making, capacity constrained competition, market microstructure. JEL-Classification: C72, D41, D43, L13. * Economics Department, University of Bern, Vereinsweg 23, CH-3012 Bern Email: [email protected] This is a preliminary version of chapter 2 of my PhDthesis. I want to thank Ernst Baltensperger, Esther Brügger, Alain Egli, Thomas Gehrig, Christian Ghiligno, Armin Hartmann, Roland Hodler, Michael Manz, Gerd Mühlheusser JeanCharles Rochet, Yves Schneider and Manuel Wälti for valuable comments and discussions. Any remaining errors are mine

Optimal Incentive Contracts for Knowledge Workers

Abstract not availableFlorian Englmaier, Gerd Muehlheusser, Andreas Roide

Gender differences in honesty: Groups versus individuals

Extending the die rolling experiment of Fischbacher and Föllmi-Heusi (2013), we compare gender effects with respect to unethical behavior by individuals and by two-person groups. In contrast to individual decisions, gender matters strongly under group decisions. We find more lying in male groups and mixed groups than in female groups