The Essential Economics of Threshold-Based Incentives: Theory, Estimation, and Evidence from the Western States 100
40 Pages Posted: 29 Apr 2010 Last revised: 16 Aug 2019
Date Written: December 1, 2014
Many public and private entities utilize incentive systems in which improvements in measured performance are rewarded only when the agent crosses some pre-specified threshold. This paper comprehensively analyzes the effects of these incentive systems on effort, the net benefits of effort, and the accuracy of performance information that is provided to the public, and lays out methods for estimating each. These methods are then used to reveal the motivations and racing strategy of ultramarathoners trying to complete a one hundred mile race in under twenty-four hours.
Keywords: thresholds, ultramarathons
JEL Classification: D81, I21
Suggested Citation: Suggested Citation