Discussion Paper No. 68
November 4, 2021
Matching with Waiting Times: The German Entry-Level Labor Market for Lawyers
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Abstract:
We study the allocation of German lawyers to regional courts for legal trainee-ships. Because of excess demand in some regions lawyers often have to wait before being allocated. The currently used "Berlin" mechanism is not weakly Pareto efficient, does not eliminate justified envy and does not respect improvements. We introduce a mechanism based on the matching with contracts literature, using waiting time as the contractual term. The resulting mechanism is strategy-proof, weakly Pareto efficient, eliminates justified envy and respects improvements. We extend our proposed mechanism to allow for a more flexible allocation of positions over time.
Keywords:
D47; D82; C78; H75; I28;
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Discussion Paper No. 67
Privacy and Platform Competition
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We analyze platform competition where user data is collected to improve adtargeting. Considering that users incur privacy costs, we show that the equilibrium level of data provision is distorted and can be inefficiently high or low: if overall competition is weak or if targeting benefits are low, too much private data is collected, and vice-versa. Further, we find that softer competition on either market side leads to more data collection, which implies substitutability between competition policy measures on both market sides. Moreover, if platforms engage in two-sided pricing, data provision is efficient.
Keywords:
ad targeting; platform competition; privacy; user data;
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Discussion Paper No. 66
Learning From Unrealized versus Realized Prices
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Our experiments investigate the extent to which traders learn from the price, differentiating between situations where orders are submitted before versus after the price has realized. In simultaneous markets with bids that are conditional on the price, traders neglect the information conveyed by the hypothetical value of the price. In sequential markets where the price is known prior to the bid submission, traders react to price to an extent that is roughly consistent with the benchmark theory. The difference's robustness to a number of variations provides insights about the drivers of this effect.
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Discussion Paper No. 65
Strategic Decentralization and the Provision of Global Public Goods
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We study strategic decentralization in the provision of a global public good. A federation, with the aim of maximizing the aggregate utility of its members, may find it advantageous to decentralize the decision-making, so that its members act autonomously to maximize their own utility. If utility is fully transferable within a federation, the larger a federation is or the more sensitive it is to the public good, the more it has incentives to remain centralized. If an overall increase in the sensitivity to the public good induces some federation(s) to decentralize, it may lead to a decrease in the aggregate provision. With non-transferable utility within a federation, those members that are smaller or less sensitive to the public good are more likely to prefer decentralization. Some members within a federation becoming more sensitive to the public good may thus lead to a lower aggregate provision, because the increased heterogeneity of the federation makes it more inclined to decentralize.
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Discussion Paper No. 64
Fairness in Markets and Market Experiments
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Whether pro-social preferences identified in economic laboratories survive in natural market contexts is an important and contested issue. We investigate how fairness in a laboratory experiment framed explicitly as a market exchange relates to preferences for fair trade products before and after the market experiment. We find that the willingness to buy at a higher price when higher wages are paid to the worker correlates both with the choice for a fair trade product before the laboratory experiment and with whether the participants are willing to pay a positive fair trade premium, elicited at the end of the experiment. These results support the notion that fairness preferences as assessed in laboratory experiments capture preferences for fair behavior in comparable situations outside the laboratory.
Keywords:
fairness; market experiments; external validity; fair trade;
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Discussion Paper No. 63
Skills, Signals, and Employability: An Experimental Investigation
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As skills of labor-market entrants are usually not directly observed by employers, individuals acquire skill signals. To study which signals are valued by employers, we simultaneously and independently randomize a broad range of skill signals on pairs of resumes of fictitious applicants among which we ask a large representative sample of German human-resource managers to choose. We find that signals in all three studied domains - cognitive skills, social skills, and maturity - have a significant effect on being invited for a job interview. Consistent with the relevance, expectedness, and credibility of different signals, the specific signal that is effective in each domain differs between apprenticeship applicants and college graduates. While GPAs and social skills are significant for both genders, males are particularly rewarded for maturity and females for IT and language skills. Older HR managers value school grades less and other signals more, whereas HR managers in larger firms value college grades more.
Keywords:
signals; cognitive skills; social skills; resume; hiring; labor market;
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Discussion Paper No. 62
Size Matters - 'Over'investments in a Relational Contracting Setting
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The corporate finance literature documents that managers tend to over-invest in their companies. A number of theoretical contributions have aimed at explaining this stylized fact, most of them focusing on a fundamental agency problem between shareholders and managers. The present paper shows that over-investments are not necessarily the (negative) consequence of agency problems between shareholders and managers, but instead might be a second-best optimal response to address problems of limited commitment and limited liquidity. If a firm has to rely on relational contracts to motivate its workforce, and if it faces a volatile environment, investments into general, non-relationship-specific, capital can increase the efficiency of a firm's labor relations.
Keywords:
relational contracts; corporate finance; capital investments;
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Discussion Paper No. 61
Who Cares About Social Image?
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This paper experimentally investigates how concerns for social approval relate to intrinsic motivations to purchase ethically. Participants state their willingness-to-pay for both a fair trade and a conventional chocolate bar in private or publicly. A standard model of social image predicts that all participants increase their fair trade premium when facing an audience. We find that the premium is indeed higher in public than in private. This effect, however, is driven by participants who preferred a conventional chocolate bar over a fair trade one in a pre-lab choice. For those who chose the fair trade chocolate bar, public exposure does not change the fair trade premium. This is captured by a generalized model where intrinsic preferences and the concern for social approval are negatively correlated.
Keywords:
image concerns; ethical consumption; fair trade; social approval; experiments;
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Discussion Paper No. 60
Does a Short-Term Increase in Incentives Boost Performance?
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If agents are exposed to continual competitive pressure, how does a short-term variation of the severity of the competition affect agents' performance? In a real-effort laboratory experiment, we study a one-time increase in incentives in a sequence of equally incentivized contests. Our results suggest that a short-term increase in incentives induces a behavioral response but does not boost total performance.
Keywords:
contest; tournament; real-effort; experiment; contract theory; forward-looking;
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Discussion Paper No. 59
Testing Missing At Random Using Instrumental Variables
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This paper proposes a test for missing at random (MAR). The MAR assumption is shown to be testable given instrumental variables which are independent of response given potential outcomes. A nonparametric testing procedure based on integrated squared distance is proposed. The statistic's asymptotic distribution under the MAR hypothesis is derived. In particular, our results can be applied to testing missing completely at random (MCAR). A Monte Carlo study examines finite sample performance of our test statistic. An empirical illustration analyzes the nonresponse mechanism in labor income questions.
Keywords:
C12; C14;
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