Since 1987, airlines have been required to report to the Department of Transportation (DOT) the scheduled...

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Since 1987, airlines have been required to report to the Department of Transportation (DOT) the scheduled and actual arrival times of their domestic flights. Although the DOT collects detailed data about the actual minutes of delay incurred on each flight, it only counts a flight as being "late" if it arrives 15 minutes or more behind schedule. The DOT issues monthly reports that rank airlines based on the percentage of their flights that are late under this definition and excerpts from these rankings are frequently reported in the media (TV, magazines, etc). In 1996, TWA implemented employee bonus programs based explicitly on the TWA's performance in the government's ranking of on-time performance. Under this program, each TWA employee would receive a payment of between $65 and $100 in any month in which TWA is placed at or near the top of the DOT ranking. Figure A shows the distribution of delay time (negative value indicates arriving earlier than scheduled time, and positive value indicates arriving later than scheduled time) for TWA flights during 1987-1995. (Vertical lines in the figures indicate 15 minute delay time). 1. (1 points) Draw the distribution of delay time of TWA flights after the incentive plan (bonus) is introduced in 1996 in Figure B (For example, the dotted line shows when there is no change in the distribution). 2. (1 point) The pattern in Figure B is most likely driven by gaming ) behavior. a. threshold b. rachet c. adverse selection d. loss-aversion Fraction of Rights (%) 3.5 0.5 Fraction of Fights (96) 6 49 1 0.5 -10 Figure A: Before 1996 10 Delay Time (minutes) 30 Figure Atter 1998 30 10 20 Delay Time (minutes) 40 Since 1987, airlines have been required to report to the Department of Transportation (DOT) the scheduled and actual arrival times of their domestic flights. Although the DOT collects detailed data about the actual minutes of delay incurred on each flight, it only counts a flight as being "late" if it arrives 15 minutes or more behind schedule. The DOT issues monthly reports that rank airlines based on the percentage of their flights that are late under this definition and excerpts from these rankings are frequently reported in the media (TV, magazines, etc). In 1996, TWA implemented employee bonus programs based explicitly on the TWA's performance in the government's ranking of on-time performance. Under this program, each TWA employee would receive a payment of between $65 and $100 in any month in which TWA is placed at or near the top of the DOT ranking. Figure A shows the distribution of delay time (negative value indicates arriving earlier than scheduled time, and positive value indicates arriving later than scheduled time) for TWA flights during 1987-1995. (Vertical lines in the figures indicate 15 minute delay time). 1. (1 points) Draw the distribution of delay time of TWA flights after the incentive plan (bonus) is introduced in 1996 in Figure B (For example, the dotted line shows when there is no change in the distribution). 2. (1 point) The pattern in Figure B is most likely driven by gaming ) behavior. a. threshold b. rachet c. adverse selection d. loss-aversion Fraction of Rights (%) 3.5 0.5 Fraction of Fights (96) 6 49 1 0.5 -10 Figure A: Before 1996 10 Delay Time (minutes) 30 Figure Atter 1998 30 10 20 Delay Time (minutes) 40

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The introduction of the TWA incentive plan in 1996 is expected to shift the distribution of delay time for TWA flights to the left as depicted in Figu... View the full answer