Alexander K. Koch

Self-Regulation Through Goal Setting

Goals are an important source of motivation. But little is known about why and how people set them. We address these questions in a model based on two stylized facts from psychology and behavioral economics: i) Goals serve as reference points for performance. ii) Present-biased preferences create self-control problems. We show how goals permit self-regulation, but also that they are painful self-disciplining devices. Greater self-control problems therefore lead to stronger self-regulation through goals only up to a certain point. For severely present-biased preferences, the required goal for self-regulation is too painful and the individual rather gives up.

Job Assignments Under Moral Hazard: The Peter Principle Revisited

We show that inefficient job assignments arise in organizations even if there is full information about employees’ types and complete contracts are possible. Our model also provides a new perspective on the Peter Principle: the output of an employee who is promoted into a job for which he is not well suited need not decline postpromotion, because he is pushed to exert more effort. Although promotions are desirable for most employees, they make the least able in a hierarchy level worse off: for them earnings increase only because they work harder to compensate for their “incompetence.”

The Trade-Off Between Liquidity and Precision of Position in Option Contracts

A common contention is that more liquid financial contracts draw trading volume from contracts for which they are close substitutes. This paper tests this hypothesis by analyzing clustering of trading activity in DAX index options. Contracts with identical maturities cluster around particular classes of strike prices. For example, options with strikes ending on 50 are less traded than options with strikes ending on 00. The degree of substitution between options with neighboring strikes depends on the strike price grid and options’ characteristics. Our empirical analysis finds a positive relation between clustering and substitutiability between option contracts, providing support to the initial hypothesis.

Personnel economics: A research field comes of age

The application of economic theory and principles to firms’ human resource problems is commonplace today. Personnel economics has come a long way since its early days in the late 1970s and 1980s, when scholars developed its theoretical foundations. In this contribution and introduction to the Special Issue ‘Advances in personnel economics’ of the German Journal of Human Resource Management, we would like to illustrate the origins of the field, outline how personnel economics relates to other research areas, describe major developments in the field and address its future challenges.

Do Economists Punish Less

A number of studies discuss whether and how economists differ from other disciplines in the amount that they contribute to public goods. We view this debate as incomplete because it neglects the willingness to sanction non-cooperative behavior, which is crucial for maintaining social order and for sustaining the provision of public goods. We study the decision whether to engage in costly punishment of a free rider in a survey-based experiment with 1423 students from seven study areas in the social sciences, as well as medicine at Aarhus University, Denmark. Using a dictator game and a social dilemma game, that captures essential features of the public goods game, we replicate previous findings that economics students give significantly less than students from other disciplines. However, when subjects decide whether or not to punish a free rider, we find that economics students are just as likely to punish as students from other disciplines.

Appendix for: Belief Elicitation in Experiments: Is There a Hedging Problem?

This appendix to the paper “Belief elicitation in experiments: Is there a hedging problem?” (http://ssrn.com/abstract=1557803) reports further details of procedures and results, in particular for treatments that are only briefly summarized in the paper. Furthermore, we document in detail questionnaire responses and reproduce the instructions for all treatments.