If you have watched an NFL game over the last six weeks, you doubtlessly know that NFL referees are in a labor dispute, and the NFL is using replacement referees for the time being. USA Today has an interesting story about the incentives these replacement refs face. Specifically, they are more vulnerable to being bought off by illicit gambling manipulation.
Among gamblers, there is obvious demand for referees willing to take bribes to alter the outcome of the game. For example, suppose the Chargers and Falcons are an even line. (All you have to do is pick the winner to win the bet.) A gambling crew could place a large sum of money on the Chargers, say $1,000,000. They could then pay $100,000 to the referee to ensure the calls go the Chargers’ way such that San Diego wins. The gamblers stand to make hundreds of thousands of dollars.
Besides the threat of criminal punishment, referees have incentive to refuse these bribes due to future benefits from continued officiating. Making terrible calls or being getting caught will get you fired, thus denying you the benefits of continued employment. All other things being equal, if you expect the NFL to continue employing you, you are less likely to take the bribe. Regular NFL officials have this type of long time horizon. They may not be completely unbribe-able, but they are darn resistant.
The replacement refs? Not so much. Their time horizon is extremely small. Once the NFL and the referees resolve their labor dispute, the replacement refs will be gone for good. Rather than years, this time horizon is probably better calculated in weeks or months. Taking a $100,000 bribe doesn’t sound so bad when you are very likely to be unemployed by Halloween, especially when you are making at most $3500 a game.
I find this argument is intuitive and compelling. Moreover, it made me rethink the reasonableness of the referees’ previous contract, which paid about $150,000 for roughly fifty days’ work last year. Such a salary seems ridiculously high given the large supply of potential referee labor. However, the NFL needs to keep the actions of the referees in line with the NFL’s wishes. We can’t just ask potential referees how much they need to be paid to not accept bribes, and then employ the cheapest labor. One way to resolve this issue is to promise continued high pay all referees. Put differently, the high salaries bridge the principal-agent problem.