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Favouritism and financial incentives: A natural experiment

  • Robert Witt

    (University of Surrey)

  • Neil Rickman

    (University of Surrey)

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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File URL: http://www.fahs.surrey.ac.uk/economics/discussion_papers/2005/DP01-05.pdf
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Paper provided by School of Economics, University of Surrey in its series School of Economics Discussion Papers with number 0105.

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Length: 23 pages
Date of creation: Feb 2005
Date of revision:
Handle: RePEc:sur:surrec:0105
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Web page: http://www.surrey.ac.uk/economics/
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  1. Zantman, Wilfried, 2002. " Constitutional Design and Regional Favoritism," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(1), pages 71-93.
  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. Sutter, Matthias & Kocher, Martin G., 2004. "Favoritism of agents - The case of referees' home bias," Munich Reprints in Economics 18180, University of Munich, Department of Economics.
  4. Luis Garicano & Ignacio Palacios-Huerta & Canice Prendergast, 2001. "Favoritism Under Social Pressure," Working Papers 2001-16, Brown University, Department of Economics.
  5. 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.
  6. John Knowles & Nicola Persico & Petra Todd, 1999. "Racial Bias in Motor Vehicle Searches: Theory and Evidence," NBER Working Papers 7449, National Bureau of Economic Research, Inc.
  7. Prendergast, Canice & Topel, Robert H, 1996. "Favoritism in Organizations," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 958-78, October.
  8. M. Grubb, 2003. "Editorial," Climate Policy, Taylor & Francis Journals, vol. 3(3), pages 189-190, September.
  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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