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Favouritism and financial incentives: A natural experiment

Author

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  • Robert Witt

    (University of Surrey)

  • Neil Rickman

    (University of Surrey)

Abstract

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.

Suggested Citation

  • Robert Witt & Neil Rickman, 2005. "Favouritism and financial incentives: A natural experiment," School of Economics Discussion Papers 0105, School of Economics, University of Surrey.
    • Handle: RePEc:sur:surrec:0105
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    File URL: https://repec.som.surrey.ac.uk/2005/DP01-05.pdf
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    References listed on IDEAS

    as
    1. Sutter, Matthias & Kocher, Martin G., 2004. "Favoritism of agents - The case of referees' home bias," Journal of Economic Psychology, Elsevier, vol. 25(4), pages 461-469, August.
    2. Zantman, Wilfried, 2002. "Constitutional Design and Regional Favoritism," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(1), pages 71-93.
    3. 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.
    4. Luis Garicano & Ignacio Palacios-Huerta & Canice Prendergast, 2005. "Favoritism Under Social Pressure," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 208-216, May.
    5. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    6. M. Grubb, 2003. "Editorial," Climate Policy, Taylor & Francis Journals, vol. 3(3), pages 189-190, September.
    7. 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.
    8. 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 545-558, July.
    9. Prendergast, Canice & Topel, Robert H, 1996. "Favoritism in Organizations," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 958-978, October.
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    More about this item

    Keywords

    Favouritism; financial incentives; soccer; referee;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations

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