Reference Dependence and Monetary Incentives: Evidence from Major League Baseball

Reio Tanji ()
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Reio Tanji: Graduate School of Economics, Osaka University

No 20-23, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper discusses what determines the reference point in decision making,using an empirical dataset of performance stats in professional baseball.Previous literature has argued that some round-numbers may work as such points,and as a result,bunching occurs around these numbers in the distribution of the target outcomes.On the other hand,in the setting of workplace, the outcomes are observable both for the worker(players) and the evaluator(managers). This paper shows that this bunching do NOT occur from the structure of the contracts,or how the managers evaluate the players.Bunching seems to stem from the reference-point dependence of the workers themselves,and so to avoid this economically inefficient behavior,we have to design contracts that incentivize players to do so.

Keywords: referencedependence; round-numbereffect; bunching; monetaryincentive; sports (search for similar items in EconPapers)
JEL-codes: D91 J01 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2021-03
New Economics Papers: this item is included in nep-lab and nep-spo
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