We analyze geographic patterns of trade between individuals using transactions data from eBay and MercadoLibre, two large online auction sites. We find that distance continues to be an important deterrent to trade between geographically separated buyers and sellers, though to a lesser extent than has been observed in studies of non-Internet commerce between business counterparties. We also find a strong "home bias" for trading with counterparties located in the same city. Further analyses suggest that location-specific goods such as opera tickets, cultural factors, and the possibility of direct contract enforcement in case of breach may be the main reasons behind the same-city bias. (JEL D44, F11, R12)

Contests (or tournaments) are pervasive in organizations. They help performance evaluation by eliminating common shocks affecting agents' performance. However, tournaments are less effective when participants have heterogeneous ability because participants may conclude that the ability gap is too large to be overcome by their effort. Our theoretical analysis shows that a similar loss of motivation arises when tournaments take place over multiple periods because interim performance acts in a way that is similar to heterogeneous ability. Analyzing the sales contests organized by a commodities company, we document that winning participants decrease their effort as their lead extends, whereas the effort of trailing participants fades only when the gap to a winning position is very large. We also show that, on average, when contests are introduced they induce a higher level of effort among participants, although the incentives weaken as the number of participants increases. Finally, we demonstrate that although retailers respond to the multiple performance dimensions of the incentive program in part by shifting effort toward sales of more expensive products, they channel most of the increased effort toward reaching more customers.tournaments, relative performance compensation, dynamic incentives, multitasking

This paper presents the results from a field experiment that examines the effects of nonfinancial performance feedback on the behavior of professionals working for an insurance repair company. We vary the frequency (weekly and monthly) and the level of detail of the feedback that the 800 professionals receive. Contrary to what we would expect if these professionals conformed to the model of the Bayesian decision maker, more (and more frequent) information does not always help improve performance. In fact, we find that professionals achieve the best outcomes when they receive detailed but infrequent (monthly) feedback. The treatment groups with frequent feedback, regardless of how detailed it is, perform no better than the control group (with monthly and aggregate information). The results are consistent with the information in the latest feedback report being most salient and professionals in the weekly treatments overweighting their most recent performance, hampering their ability to learn.

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This study investigates the relationship between monitoring, decision making, and learning among lower-level employees. We exploit a field-research setting in which business units vary in the “tightness” with which they monitor employee decisions. We find that tighter monitoring gives rise to implicit incentives in the form of sharp increases in employee termination linked to “excessive” use of decision-rights. Consistent with these implicit incentives, we find that employees in tightly monitored business units are less likely than their loosely monitored counterparts to: (1) use decision-rights; and (2) adjust for hard information, in the form of historical performance data, in their decisions. These decision-making patterns are associated with large and systematic differences in learning rates across business units. Learning is concentrated in business units with “loose monitoring” and entirely absent in those with “tight monitoring.” The results are consistent with an experimentation hypothesis in which tight monitoring of decisions leads to more control but less learning. Data Availability: The data used in this study cannot be made publicly available due to confidentiality agreements with the participating organization.

This paper examines the effect of corporate governance on investor reactions to accounting choice in the context of accounting for business combinations. Using a sample of 324 recent stock swap acquisitions I find that, contrary to practitioners' belief that capital markets penalize purchase accounting, the opposite appears to be true; there is a negative and significant differential market reaction of approximately 4% for acquiring firms that announce pooling transactions. This return differential declines to negative 8% for firms with ineffective corporate governance. These findings are consistent with capital markets interpreting the choice of purchase accounting as a signal of management's confidence in the likelihood of a successful merger. This signal is particularly relevant when corporate governance is considered ineffective.

This paper analyzes the effects of providing forward-looking metrics on employee decision making. We use data from a southern European bank that, in April 2002, started providing its branch managers with customer lifetime value (CLV) information about mortgage applicants. The data allows us to gauge the effects of enriching the information set of these employees in an environment where incentives and the allocation of decision rights remained unchanged. We find that CLV availability resulted in a significant shift in attention towards the more profitable client segments (the weight of the top segment in the portfolio of customers increases from 26% to 34%), but we do not find evidence of improved cross-selling (except for an increase in the sale of insurance products). Moreover, the use of CLV information did not have a negative impact on pricing, as some of the literature suggests, nor on default risk, indicating that managers increased sales to more profitable customers by providing better customer service. * We thank Bob Gibbons, Krishna Palepu, José M. Vidal-Sanz, and seminar participants at the Harvard Accounting and Management Brown Bag, IESE, JEI Madrid

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