Incentive effects

Alex Rosenberg. But there are still incentive effects in those countries. It is just the pay-offs that are different. You have to work hard to climb the ladder in the Communist Party, as opposed to working hard in climbing the corporate ladder. 

We next ask what are the implications of being aware of future self-control problems by comparing naifs and sophisticates. We identify two effects. First, sophistication about future self-control problems can make people pessimistic about future behavior (that is, they believe in general that they will hit more often than they would if they had no self-control problem). We refer to this phenomenon as the pessimism effect. Second, sophistication about future self-control problems may make people realize that they will resist future temptations only if they resist temptation today. We refer to this phenomenon as the incentive effect. Because the habit formation property of addictive products implies that current indulgence has larger future costs the more people expect to refrain in the future, pessimism about future behavior tends to exacerbate overconsumption due to self-control problems. The incentive effect, in contrast, tends to mitigate overconsumption due to self-control problems. Hence, whether sophisticates hit more or less often than naifs depends on the relative magnitudes of the pessimism and incentive effects. 

Of course, since the incentive effect is driven by future restraint, it can be operative only if there is some future period where people would refrain in the face of pure pessimism. Consider the implications of this point in a stationary model. If in period 1 people would hit when "unhooked" in the face of pure pessimism, then in all periods they would hit when unhooked in the face of pure pessimism, and therefore the incentive effect cannot be operative. In contrast, if in period 1 people would refrain when unhooked in the face of pure pessimism, then in all periods they would do so, and therefore the incentive effect can be operative. This logic implies that if people are initially unhooked, the incentive effect can be operative if and only if people would refrain without it. Since the pessimism effect makes sophisticates more likely to hit than nails, we can therefore conclude that sophisticates are more likely than naifs to become addicted starting from being unhooked. 

The crucial condition in proposition 3 is that there is eventually some period in which people will refrain when unhooked even in the face of pure pessimism. We feel that this is a realistic condition for many addictive products—eventually people will lose interest in the product as long as they are unhooked at that time. The results in proposition 3 reflect that this condition is exactly the condition for when the incentive effect is operative in the youth environment. Part 1 states that in this case sophisticates are less likely to hit than naifs in all situations. Part 2 states that in this case sophisticates cannot suffer a costly lifelong addiction, because they choose to hit throughout their lives only if that is optimal from a period-1 perspective. 

These results stand in stark contrast to the results in the stationary model. In the stationary model, the incentive effect is operative if and only if in the first period people would refrain when unhooked in the face of pure pessimism, and as a result sophisticates can suffer a very harmful lifelong addiction because of a feeling that addiction is inevitable. In the youth model, in contrast, as long as the temptation to consume eventually falls to the point at which people would choose to refrain even in the face of pure pessimism, the inevitability of addiction vanishes, and as a result sophisticates are less likely to hit than naifs and unlikely to suffer harmful lifelong addictions. 

This inequality follows from the assumption that TCs would refrain when hooked. If TCs would hit when hooked, the inequality would be reversed. Moreover, the discerning reader will notice that in that case the incentive effect being operative means that sophisticates perceive the same benefit from restraint as TCs and naifs (and they all hit when hooked). 

Home JA, Pettitt AN. High incentive effects on vigilance performance during 72 hours of total sleep deprivation. Acta Psychol (Amst) 1985 58 123-139. 

Haslam DR. The incentive effect and sleep deprivation. Sleep 1983 6 362-368. 

Note that these incentives apply to methodologies at facility level. Where countries separate aggregate emission allocations from the way they are distributed between facilities, the incentive effects need to be distinguished. For example, taking account of recent emissions in setting aggregate national or sector caps may introduce no operational distortions if the allocations to individual facilities are done on an entirely different basis - but the disjuncture may exacerbate distributional tensions. 

In terms of their incentive effects, one-off grandfathering and auctioning are equivalent and efficient. Thus, both represent the zero-distortions reference case here. 

The need for lobbying may exacerbate the dynamic incentive effects discussed in Section 2.5 if firms make inefficient investment decisions to improve their bargaining position for free allowances. 

Incentive arousal role of dopamine and the behavioral effects of psychostimulants. An incentive arousal role of DA is best suited to explain many behavioral properties of psychostimulants. Indeed, the notion of an incentive role of endogenous DA is largely derived from the role attributed to DA as the substrate of the effect of psychostimulants on reinforcement and instrumental responding (Di Chiara, 1995). Psychostimulants elicit typical unconditional incentive effects in the form of approach towards stimuli and exploratory behavior related to novelty of the context. Psychostimulants also facilitate conditioned reinforcement (the ability of a Pavlovian CS to elicit responding instrumental to its presentation) (Robbins et al., 1989), an effect involving preliminary Pavlovian association with a reward and therefore related to the incentive properties of the stimulus. 

Stitzer, M. L., Iguchi, M. Y., 8c Felch, L. J. (1992). Contingent take-home incentive Effects on drug use in methadone maintenance patients. Journal of Consulting and Clinical Psychology, 60,927-934. 

The effect of activation on job search has been analysed by Geerdsen (2002) in a study concerning incentive effects in Denmark. Empirical data on search activity is usually collected as survey data from a certain period of time and is therefore not suitable for an analysis of change within a period. Instead, it is possible to measure the departure from unemployment by using register data on the duration of unemployment spells. The empirical approximation to change in search activity is therefore the probability of leaving unemployment as the duration of the spell increases and the individual approaches the start of the activation period. 

To examine the effects of particular tax credits on pharmaceutical R D investment, a more useful measure is the marginal incentive effect or marginal credit rate (5). This rate is the number of cents that a tax credit reduces the cost of an additional dollar that the taxpayer decides to spend on R D. The credit rate is a negative tax rate. Because of limitations on particular tax credits, the effective marginal credit rate can be different from the statutory rate. This chapter reviews what is known about the marginal credit rate associated with each of the several tax credit provisions affecting pharmaceutical operations. 

Marginal incentive effect See marginal credit rate. 

It would be useful to check these impressions against the official statistics on occupational risk collected by the Bureau of Labor Statistics (BLS), but these are notoriously unreliable. Indeed, the National Research Council, an offshoot of the National Academy of Sciences that reports on public policy issues, found the BLS data inadequate for monitoring the effectiveness of safety programs (Saddler, 1987). There are several problems. First, the data are collected as part of the Occupational Safety and Health Act (OSHA) reporting system, which subjects them to distorting incentive effects. Firms are required to maintain logs of fatal and nonfatal accidents, but they have an incentive to underreport this information since it could be used as evidence to support workers compensation or tort claims by workers, and because... 

In principle, the incentive effect of WC depends entirely on experiencerating. If all firms paid the same premiums into the system, or even if firms paid standard amounts based on industry, location, or other factors, there would be no payoff to improving working conditions. The ideal, of course, would be the opposite, a system in which the employer s... 

When employees reach a consensus and regard Kaizen as a personal core value, enterprise will have the power of culture. By taking full advantages of culture s effectiveness, e.g. guiding effectiveness, coagulation effectiveness, incentive effectiveness, radiation effectiveness. 

Consider contexts when capacity decisions have to be made in advance of demand realization. In the apparel industry, capacity has to be chosen eight to twelve months ahead of demand. In the auto industry, plans for capacity configurations at plants are made several years in advance. For infrastructure decisions, such as highway construction, decisions may be made fifteen to twenty years in advance. In a just-in-time delivery context, decisions may be made four hours in advance ([52]). Clearly the main question is the extent of demand uncertainty when decisions are made and the consequences of having an inadequate level of capacity. In addition, if the capacity decision maker is different from the information provider, incentive effects have to be considered. Hence the need for coordination agreements (as discussed in Chapter 5). However, the availability of alternate sources of capacity, albeit at a higher cost, can relieve the pressure to commit to capacity in advance. 

Krueger, A.B. (1990a). "Incentive Effects of Workers Compensation Insurance," Journal of Public Economics 41(1) 73-99. 

Gilbert, S. M. and Z. K. Weng. Incentive Effects Favor Nonconsolidating Queues in a Service System The Principal-Agent Perspective. Management Science 44 1662-1669. 

One important study in this tradition avoids this problem. Moore and Viscusi (1989) relate benefit levels not to lost-time injury claims but to fatality rates. The reporting of fatalities is presumably not affected by the level of benefits and consequently, they argue, any relationship can be assumed to reflect safety incentive effects rather than reporting effects. The authors in fact find a strong negative relationship between benefit (and hence premium) levels on the one hand and fatality rates on the other, thus lending support to the hypothesis that experience rating works to make employers more safety conscious. 

While the US research is now beginning to suggest that higher benefit (and hence premium) levels are associated with lower numbers of actual injuries, this does not establish conclusively that employers in the high premium states are responding to the incentive effects of these premiums. An alternative possibility is that there... 

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