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Favouritism and Financial Incentives: A Natural Experiment

  • Rickman, Neil
  • Witt, Robert

Principals who exercise favouritism towards certain agents may harm those who are not so favoured. Other papers have produced evidence consistent with the presence of such favouritism but have been unable to consider methods for controlling it. We address this issue in the context of a natural experiment from English soccer, where one particular league introduced professional referees in 2001-02, thereby changing the financial incentives and monitoring regime faced by these referees. Because the change was not effected in all leagues, the ‘experiment’ has both cross-sectional and intertemporal dimensions. We study the effects of professional referees on an established measure of referee bias: length of injury time in close matches. We find that referees exercised favouritism prior to professionalism but not afterwards, having controlled for selection and soccer-wide effects. The results are consistent with a financial incentive effect as a result of professional referees and indicate that subtle aspects of principal-agent relationships (such as favouritism) are amenable to contractual influence.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4968.

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Date of creation: Mar 2005
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Handle: RePEc:cpr:ceprdp:4968
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  1. John Knowles & Nicola Persico & Petra Todd, 2001. "Racial Bias in Motor Vehicle Searches: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 109(1), pages 203-232, February.
  2. Gray, Alastair & Rickman, Neil & Fenn, Paul, 1999. "Professional Autonomy and the Cost of Legal Aid," Oxford Economic Papers, Oxford University Press, vol. 51(3), pages 545-58, July.
  3. Matthias Sutter & Martin G. Kocher, . "Favoritism of agents – The case of referees’ home bias," Papers on Strategic Interaction 2002-28, Max Planck Institute of Economics, Strategic Interaction Group.
  4. Luis Garicano & Ignacio Palacios & Canice Prendergast, 2001. "Favoritism Under Social Pressure," NBER Working Papers 8376, National Bureau of Economic Research, Inc.
  5. Zantman, Wilfried, 2002. " Constitutional Design and Regional Favoritism," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(1), pages 71-93.
  6. Prendergast, Canice & Topel, Robert H, 1996. "Favoritism in Organizations," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 958-78, October.
  7. M. Grubb, 2003. "Editorial," Climate Policy, Taylor & Francis Journals, vol. 3(3), pages 189-190, September.
  8. Naegelen, Florence & Mougeot, Michel, 1998. "Discriminatory public procurement policy and cost reduction incentives," Journal of Public Economics, Elsevier, vol. 67(3), pages 349-367, March.
  9. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
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