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

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  • Darren Grant

    () (Department of Economics and International Business, Sam Houston State University)

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.

Suggested Citation

  • Darren Grant, 2010. "The Simple Economics of Thresholds: Evidence from the Western States 100," Working Papers 1004, Sam Houston State University, Department of Economics and International Business.
  • Handle: RePEc:shs:wpaper:1004
    as

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    File URL: http://www.shsu.edu/academics/economics-and-international-business/documents/wp_series/wp10-04_paper.pdf
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    References listed on IDEAS

    as
    1. Darren Grant & William Green, 2013. "Grades as incentives," Empirical Economics, Springer, vol. 44(3), pages 1563-1592, June.
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    6. Darren Grant, 2010. "Dead On Arrival: Zero Tolerance Laws Don'T Work," Economic Inquiry, Western Economic Association International, vol. 48(3), pages 756-770, July.
    7. Reback, Randall, 2008. "Teaching to the rating: School accountability and the distribution of student achievement," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1394-1415, June.
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    11. Charles Perrings & David Pearce, 1994. "Threshold effects and incentives for the conservation of biodiversity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(1), pages 13-28, February.
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    13. Becker, William E. & Rosen, Sherwin, 1992. "The learning effect of assessment and evaluation in high school," Economics of Education Review, Elsevier, vol. 11(2), pages 107-118, June.
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