Wait-and-See or Step in? Dynamics of Interventions

We study the optimal intervention policy to stop projects in a relational contract between a principal and a policymaker. The policymaker is privately informed about his ability and privately chooses how much effort to exert. Before a project is completed, the principal receives a signal about its outcome and can intervene to stop it. Intervention may prevent a bad outcome, but no intervention leads to better learning about the policymaker’s ability. In the benchmarks with observable effort or observable ability, optimal intervention follows a threshold rule. With unobservable effort and ability, the optimal policy switches between intervention and no intervention. (JEL D78, D82, D86)

Effort Intentions in Teams

Theoretical models of individual motivation in groups represent overt effort intentions as precursors of observable effort expenditure in a group context. We examined established triggers of group motivation gains in a scenario-based paradigm, exploring which of these triggers are already manifested at the level of effort intentions. We expected higher effort intentions during teamwork as compared with individual work when teamwork enabled one of the following processes: social compensation, social comparison, or social indispensability. Fifty-seven basketball players (Study 1) and 97 adolescents (Study 2) were asked to imagine individual and team sports situations and to indicate their intended effort in these situations. Features of the team situations were manipulated following a 2 (task demands: conjunctive vs. additive) × 4 (partner performance: inferior, equally strong, moderately superior, very superior) design. Results showed that social compensation, social comparison, and social indispensability were already at work at the level of overt effort intentions.

Regulatory Quality Under Imperfect Oversight

We analyze the positive and normative implications of regulatory oversight when the policymaking agency can improve the quality of regulation through effort, but only some kinds of effort are observable by the overseer, and the overseer's only power is the ability to veto new regulation. Such oversight can increase the quality of agency regulation, but it also introduces inefficiencies—the agency underinvests in unobservable effort and overinvests in observable effort. Agencies have no incentive to conceal their activities from the overseer; the reforms that are likely to reduce inefficiency are therefore those that improve overseer expertise or lower the costs of agency disclosure, not those that compel disclosure. The normative implications depend on the relative severity of bureaucratic drift and slack problems. When slack is paramount, an overseer that is more anti-regulation than the agency or society improves social welfare, as long as it does not deter the agency from regulating entirely. When drift is paramount, oversight improves social welfare only when it deters regulation. In this case, regulatory oversight is weakly dominated by one of two alternatives: eliminating oversight or banning regulation.