The Simple Economics of Thresholds: Evidence from the Western States 100

Darren Grant ()

No 1004, Working Papers from Sam Houston State University, Department of Economics and International Business

Abstract: Many public and private entities utilize incentive systems in which improvements in measured performance are rewarded only if the agent crosses some pre-specified threshold. But neither the theory of their incentive effects nor the methods of estimating them has been fully developed. This paper comprehensively analyzes thresholds’ positive and normative properties, lays out a simple and natural empirical strategy for estimating their incentive effects, and presents multiple applications of both. The strongest effects are exhibited by ultramarathoners trying to complete a one hundred mile race in under twenty-four hours.

Date: 2010-11
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Persistent link: https://EconPapers.repec.org/RePEc:shs:wpaper:1004

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