Selecting the Best: The Persistent Effects of Luck
Mikhail Drugov, Margaret Meyer, and Marc Möller
CEPR Discussion Paper 19309
We analyze a model of organizational learning where agents’ performance reflects time-invariant unobservable ability, privately-chosen effort, and noise. Our main result is that, even when performance is almost entirely random, maximizing the probability of identifying the best agent (“selective efficiency”) requires biasing final selection in favor of early winners. Making luck persistent, e.g. through fast-tracks, is thus rationalized by the pursuit of selective efficiency. Agents’ strategic efforts amplify the persistence of luck. Organizational learning also affects the persistence of initial advantages stemming from identity. Identity-dependent biases, e.g. gender-specific mentoring, create incentives that make selection both more efficient and more equitable
The Effect of Occupational Choice and Stereotypes on Labor Market Sorting
Oleg Muratov and Marc Möller
We incorporate competition for jobs into an assignment model to investigate the implications of occupational choice for the matching between heterogeneous workers and jobs of differing quality. When occupational choice is without frictions, more able workers choose more (costly) education and workers sort across occupations in a way that induces positive assortative matching. We characterize the distortions that arise when entry into an occupation is costly for a group of workers, e.g. due to the existence of stereotypes. The associated utility-loss is increasing with a worker’s ability because, although high-ability workers obtain jobs of similar quality as in the absence of stereotypes, competition for those jobs turns out to be stronger.
The Last Shall Be First: Innovation as a Head-to-Head Race
Patrick Arnold, Marc Möller, and Catherine Roux
Uncertainty about the value of a contested innovation induces leaders and laggards to update their expectations in opposite directions. We characterize situations in which firms that have obtained an initial advantage are not the most likely to achieve final success. In spite of amplifying a leader’s advantage, greater contest intensity facilitates this effect, challenging the view that laggards require support to remain competitive.
Common Ownership and Intertemporal Price Discrimination
Patrick Arnold, Marc Möller, and Makoto Watanabe
This paper considers the effects of common ownership on markets featuring intertemporal price discrimination (e.g. airline industry). We argue that allocation-effects, i.e. the effect of common ownership on the intertemporal allocation of sales, are key to understand whether common ownership is anti-competitive and whether price-dispersion can serve as a measure of competitive conduct. Our theory identifies advance purchase markets as a setting where common ownership can have positive effects on both welfare and consumer surplus.
Procuring New Ideas: The Value of Performance Information in Innovation Tournaments
Martina Bossard, Marc Möller, and Catherine Roux
Coming Soon!