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Monday, October 19, 2020 at 11:30am to 1:00pmVirtual Event
Sam Dodini, Cornell University - Practice Job Talk
Making and Breaking Reference-Dependent Preferences: Evidence from Door-to-Door Sales
Abstract: This paper uses novel, comprehensive data from a pest control sales company to examine how principals affect reference dependence in a principal-agent setting. I provide evidence that lump-sum bonuses incentivize workers to set specific long-run expectations, which workers translate to daily performance references consistent with theories of goal-setting. Daily labor supply kinks significantly downward at candidate references during normal workdays. However, during individual rank-order tournaments, there is no such kink, and labor supply is notably flat across the reference. This is attributable to workers anchoring their labor supply to a new reference--their opponent--consistent with tournament theory. Individual rank-order tournaments strategically break reference dependence and increase labor supply in the gain domain. Through their choice of contract structure and short-run incentives, firms exert influence over the references workers set and therefore their daily labor supply choices.
If you are interested in participating in this seminar, please email Heather LaCombe at email@example.com for Zoom information.