Self-Regulation through Goal Setting

Goals are an important source of motivation. But little is known about why and how people set them. We address these questions in a model based on two stylized facts from psychology and behavioral economics: i) Goals serve as reference points for performance. ii) Present-biased preferences create self-control problems. We show how goals permit self-regulation, but also that they are painful self-disciplining devices. Greater self-control problems therefore lead to stronger self-regulation through goals only up to a certain point. For severely present-biased preferences, the required goal for self-regulation is too painful and the individual rather gives up.goals, self-control, motivation, time inconsistency, psychology

Goals and Psychological Accounting

We model how people formulate and evaluate goals to overcome self-control problems. People often attempt to regulate their behavior by evaluating goal-related outcomes separately (in narrow psychological accounts) rather than jointly (in a broad account). To explain this evidence, our theory of endogenous narrow or broad psychological accounts combines insights from the literatures on goals and mental accounting with models of expectations-based reference-dependent preferences. By formulating goals the individual creates expectations that induce reference points for task outcomes. These goal-induced reference points make substandard performance psychologically painful and motivate the individual to stick to his goals. How strong the commitment to goals is depends on the type of psychological account. We provide conditions when it is optimal to evaluate goals in narrow accounts. The key intuition is that broad accounts make decisions or risks in different tasks substitutes and thereby create incentives to deviate from goals. Model extensions explore the robustness of our results to different timing assumptions and goal and account revision.quasi-hyperbolic discounting, reference-dependent preferences, loss aversion, self-control, mental accounting, goals

Clustering of Trading Activity in the DAX Index Options Market

Trades in DAX index options with identical maturities cluster around particular classes of strike prices. For example, options with strikes ending on 50 are less traded than options with strikes ending on 00. Clustering is higher when options with close strike prices are good substitutes. The degree of substitution between options with neighboring strikes depends on the strike price grid and options' characteristics. Using regression analysis we analyze the relation between clustering, grid size, and the options' characteristics. To our knowledge this paper is the first to explore how the grid size of strike prices affects options' trading volume.Clustering, Incidental Truncation, Index Options, Volume

Coordination under the Shadow of Career Concerns

To innovate, employees need to develop novel ideas and coordinate with each other to turn these ideas into better products and services. Work outcomes provide signals about employees' abilities to the labor market, and therefore career concerns arise. These can both be 'good' (enhancing incentives for effort in developing ideas) and 'bad' (preventing voluntary coordination). Our model shows how the firm designs its explicit incentive system and organizes work processes to take these conflicting forces into account. The comparative statics results suggest a link between the increased use of teams and recent changes in labor market returns to skills.career concerns, group incentives, knowledge work, reputation, teams

Motivational Goal Bracketing

It is a puzzle why people often evaluate consequences of choices separately (narrow bracketing) rather than jointly (broad bracketing). We study the hypothesis that a present-biased individual, who faces two tasks, may bracket his goals narrowly for motivational reasons. Goals motivate because they serve as reference points that make substandard performance psychologically painful. A broad goal allows high performance in one task to compensate for low performance in the other. This partially insures against the risk of falling short of ones' goal(s), but creates incentives to shirk in one of the tasks. Narrow goals have a stronger motivational force and thus can be optimal. In particular, if one task outcome becomes known before working on the second task, narrow bracketing is always optimal.goals, multiple tasks, motivational bracketing, self-control, time inconsistency, psychology

An experimental test of career concerns

Holmström’s (1982/99) career concerns model has become an important workhorse for the analysis of agency issues in many fields. The underlying signal jamming argument requires players to use information in a Bayesian way – which may or may not reasonably approximate real-life decision makers’ behavior. Testing this theory with field data is difficult since typically little is known about the information that individuals base their decisions on, and this explains the dearth of empirical studies. We provide experimental evidence that the signal jamming mechanism works in a laboratory setting. Moreover, subjects’ beliefs fit remarkably well requirements imposed by the Bayesian equilibrium concept.incentives, reputation, career concerns, signal jamming, experiments

What Do We Work For? An Anatomy of Pre- and Post-Tax Earnings Growth

Promotions and cross-firm mobility provide substantial gains in earnings – a well established finding based on gross income data. Yet, what matters for incentives is how much an individual can consume or save after taxation. We show that net and gross income growth patterns may differ substantially when a progressive tax system allows for deduction opportunities. Exploiting unique matched employer-employee data with information on tax payments and employee mobility, we find that gross income gains from promotions and cross-firm mobility do not translate into significantly higher net income growth, because employees adjust their tax-shielded consumption and savings (in particular, deductible private pension contributions and mortgage-financed housing) to maintain constant net income growth.earnings growth, promotions, mobility, taxable income, dynamic panel data models, matched employer-employee data

Preferences and Beliefs in a Sequential Social Dilemma: A Within-Subjects Analysis

Within-subject data from sequential social dilemma experiments reveal a correlation of first-and second-mover decisions for which two channels may be responsible, that our experiment allows to separate: i) a direct, preference-based channel that influences both first- and second-mover decisions; ii) an indirect channel, where second-mover decisions influence beliefs via a consensus effect, and the first-mover decision is a best response to these beliefs. We find strong evidence for the indirect channel: beliefs about second-mover cooperation are biased toward own second-mover behavior, and most subjects best respond to stated beliefs. But when first movers know the true probability of second-mover cooperation, subjects' own second moves still have predictive power regarding their first moves, suggesting that the direct channel also plays a role.experimental economics, consensus effect, social dilemmas

Career concerns incentives: an experimental test

Holmström's (1982/99) career concerns model has become a workhorse for analyzing agency issues in many elds. The underlying signal jamming argument requires players to use information in a Bayesian way, which is difficult to directly test with eld data: typically little is known about the information that individuals base their decisions on. Our laboratory experiment provides prima facie evidence: i) the signal jamming mechanism successfully creates incentives on the labor supply side; ii) decision errors take time to decrease; iii) while subjects' average beliefs are remarkably consistent with play, a mild winner's curse arises on the labor demand side

Phosphocholine-Modified Lipooligosaccharides of Haemophilus influenzae Inhibit ATP-Induced IL-1beta Release by Pulmonary Epithelial Cells

Phosphocholine-modified bacterial cell wall components are virulence factors enabling immune evasion and permanent colonization of the mammalian host, by mechanisms that are poorly understood. Recently, we demonstrated that free phosphocholine (PC) and PC-modified lipooligosaccharides (PC-LOS) from Haemophilus influenzae, an opportunistic pathogen of the upper and lower airways, function as unconventional nicotinic agonists and efficiently inhibit the ATP-induced release of monocytic IL-1beta. We hypothesize that H. influenzae PC-LOS exert similar effects on pulmonary epithelial cells and on the complex lung tissue. The human lung carcinoma-derived epithelial cell lines A549 and Calu-3 were primed with lipopolysaccharide from Escherichia coli followed by stimulation with ATP in the presence or absence of PC or PC-LOS or LOS devoid of PC. The involvement of nicotinic acetylcholine receptors was tested using specific antagonists. We demonstrate that PC and PC-LOS efficiently inhibit ATP-mediated IL-1beta release by A549 and Calu-3 cells via nicotinic acetylcholine receptors containing subunits alpha7, alpha9, and/or alpha10. Primed precision-cut lung slices behaved similarly. We conclude that H. influenzae hijacked an endogenous anti-inflammatory cholinergic control mechanism of the lung to evade innate immune responses of the host. These findings may pave the way towards a host-centered antibiotic treatment of chronic airway infections with H. influenzae