Companies don't know a manager's ability, but they do know that the talented managers are able to spend 1 million dollars worth of their time learning how to predict the scores in football games, an achievement that is visible, whereas the untalented managers need to spend 8 million dollars worth of their time. If either type of manager is not hired by the auto industry, he will stay in a job in the lathe industry worth 3 million dollars to him.
(a) If auto companies actually could not observe football score ability, what is the maximum amount such a company would offer to hire a manager?
ANSWER. .3 (10) + .7 (0), which is 3 million, the same as in the lathe industry. That is the expected value to the employer.
(b) If auto companies can observe football score ability, what is the payoff to a talented manager who learns to predict football scores? (Assume a separating equilibrium is played out) What is his payoff if he does not learn that skill?
ANSWER. If the talented manager learns, he will be paid 10 million, and his payoff will be 10-1 = 9 million. If he does not learn, his payoff will be 3 - 0 = 3.
(c) If auto companies can observe football score ability, what fraction of managers will learn about football? (Assume a separating equilibrium is played out) Explain why you chose this number.
ANSWER. 30 percent of managers will learn about football, because talented managers will have higher payoffs from so doing, and untalented managers do not. The last part of this question explains the payoffs of talented managers. Untalented managers have a choice between learning about football, for a payoff of 2 million, and not learning, for a payoff of 3, and hence will not learn.
2. (10 points) Suppose that in the disk drive industry there are two firms and that research spending is a strategic substitute. (a) Show diagrammatically what this means, and (b) show whether a firm would prefer to make its R+D choice first, or second.
ANSWER. (a) (Diagram, similar to the Cournot one)
(b) There is a first-mover advantage. If the firm chooses large R+D first, the other firm will choose a lower value for R+D.
3. (15 points) There is controversy over whether prosecutors should argue for lower sentences for art thieves who help arrange for the return of stolen paintings. (a) Why not? (b) If prosecutors do have a policy of allowing sentences to be reduced 50 percent for this kind of cooperation, and such cooperation occurs in 10 percent of cases, how much, in the new equilibrium, will the average sentence served fall?
ANSWER. (a) There will be more theft, especially of extremely valuable paintings that are hard to resell, because they are useful as bargaining chips. This effect is not just because the average sentence served will fall, but because criminals have an additional incentive to steal paintings.
(b) The average sentence served will fall by something less than the 5 percent you get by multiplying 50 percent by 10 percent. This is because judges will start imposing longer sentences in response to the policy change, as the article suggests in the case of one judge. The judge, knowing that sentences will be reduced for cooperation, will set the initial sentences higher. One judge tried to do this, and while he failed because of his extreme reaction (he was not allowed to double the sentence) he could have succeeded if he had been more moderate in his increase.
The article, ``Art Thief Displays True Colors In Bargaining for Leniency,'' (WSJ, Sept. 29, 1997) will be very helpful in answering this question. The following joke will not, but will at least lighten up the test:
Recently a crook in Paris almost got away with stealing several paintings from the Louvre. After planning the crime, breaking in, evading security, getting out and escaping with the goods, however, he was captured--- only ten blocks away, having run out of gas.
When asked how he could succeed so masterfully in getting in and out of the building but then make such a stupid mistake, he replied:
"I only stole the paintings because I was very poor. I had no Monet to buy Degas to make de Van Gogh."
Return to the Test Page.
| Headline (HD) | Easel Pickings:
For This Art Collector,
Priceless Paintings Are
Get-Out-of-Jail Cards
---
Police and Museums Listen
When Myles Connor Says
He'll Find a Rembrandt
---
`You're Rotten to the Core'
09/29/1997
Myles Connor, a notorious Boston art
thief, was dining in a
Bloomington, Ill., restaurant 150 miles south of Chicago a few years
ago. His companion seemed wonderfully interested in purchasing stolen
art.
"You know," Mr. Connor said as he leaned across the table, "the FBI
would really like to know where I am right now. But those guys are so
stupid they haven't got a clue." |
| Text (TD) |
Unfortunately for Mr. Connor, his companion was an undercover agent
for the Federal Bureau of Investigation -- Thomas Daly, who tells the
story. Incidents such as this have helped land Mr. Connor in jail many
a
time in his criminal career -- and in jail Mr. Connor sits.
But now, Mr. Connor is playing what law-enforcement officers say
may
be a far cagier game. He and a younger associate, William "Billy"
Youngworth, who also has a criminal record, have been claiming that
they
can help crack the spectacular case involving art theft from the
Isabella Stewart Gardner Museum in Boston that has frustrated
detectives
and art lovers since 1990.
In interviews published in the Boston Herald, the two have
suggested
they can arrange the return of the Gardner art -- if only Mr.
Youngworth
can get leniency on state charges that he possessed a stolen van, and
if
Mr. Connor can be released from the final 2 1/2 years of his current
11-year federal sentence for interstate transportation of stolen art.
They have also suggested they would like the $5 million reward that
has
been offered for the art's return.
The possibility that negotiations with the two men might lead to
return of the 13 stolen Gardner artworks, including a rare Vermeer and
three Rembrandts, has sent the art world into a tizzy. People cringe
at
the prospect of dealing with Mr. Connor. "Unfortunately, you're rotten
to the core," federal District Judge Richard Mills told Mr. Connor in
Springfield, Ill., when giving him his current prison sentence.
At the same time, though, museum curators across the country, as
well
as wealthy and powerful people who support museums, are fixated on the
idea of having the Gardner masterpieces returned.
"Let's not be squeamish in dealing with these guys; let's get the
art
back," says Weld Henshaw, an attorney with the top Boston firm of
Choate, Hall & Stewart who has represented victims in several art-
theft
cases. A Gardner spokeswoman says the museum is "very hopeful" the
paintings will be returned.
Whether Mr. Connor turns up the Gardner art or not -- and federal
investigators are taking his claim seriously -- his career sheds light
on the murky world of art theft. His tactics show how crooks often
wait
a decade or more to sell lesser-known stolen artworks, when they are
no
longer "hot." His methods also help answer a riddle that often puzzles
art lovers: Why do thieves steal artworks so well-known and so
recognizably stolen that only a fool would buy them?
The answer is that they often turn Cezannes and Monets into
bargaining chips. When they get into trouble with authorities, they
make
behind-the-scenes deals with prosecutors to return art in exchange for
leniency. Or as Judge Mills told Mr. Connor: "You barter."
Mr. Connor has dealt in looted art ranging from Rembrandts to
grandfather clocks, and his victims have ranged from institutions such
as the Boston Museum of Fine Arts and Amherst College to private
estates
throughout New England.
Who carried out the Gardner theft isn't known; Messrs. Connor and
Youngworth aren't suspects because both were behind bars at the time.
But investigators suspect that Mr. Connor, because of his history of
handling stolen art, may have learned the whereabouts of the Gardner
loot.
Short, red-haired and usually bearded, the 54-year-old Mr. Connor
is
the brainy son of a suburban Boston policeman. "Myles is exceptionally
bright," says Byron Cudmore, who as assistant U.S. attorney in
Springfield prosecuted Mr. Connor in 1990.
As early as 1966, when he was just 23, Mr. Connor was being pursued
in connection with an art theft. Cornered on an apartment rooftop in
Boston by the Massachusetts State Police, he shot and wounded a
trooper
before being captured. That contributed to a continuing interest in
Mr.
Connor by the state police. It also led to a guilty plea in state
court
and imprisonment for assault with intent to murder.
When the Woolworth mansion in Winthrop, Maine, was looted of art
and
antiques in 1973, the FBI set up a sting, pretending to be in the
market
for the stolen works. The agency soon found itself negotiating with
Mr.
Connor. When he led the agents to a U-Haul truck in a Cape Cod, Mass.,
parking lot on May 18, 1974, they found one painting by Andrew Wyeth
and
three by N.C. Wyeth, all stolen from the Woolworth estate. Mr. Connor
was arrested on federal charges of interstate transportation of stolen
art and faced other state charges. He pleaded guilty to both.
Years later, in 1989, he described to Mr. Daly, the undercover
agent,
how he managed to limit the damage. Mr. Daly says Mr. Connor's account
went like this:
Seeking leniency on the state and federal charges, Mr. Connor told
a
Massachusetts State Police official that he could return some minor
stolen art. When the official spurned that offer, Mr. Connor
exclaimed:
"What will it take to get me off, a Rembrandt?"
When the state-police official sounded more receptive to that,
"Myles
told me that he proceeded to arrange the theft of a Rembrandt from the
Boston Museum of Fine Arts," Mr. Daly says.
Shortly after Mr. Connor's chat with the state-police official, two
men yanked a Rembrandt portrait off the wall of the Boston museum and,
firing shots at guards, ran out the door and escaped in a waiting car.
Mr. Connor arranged the return of the Rembrandt, with a man in a ski
mask leaving the painting in a police-car trunk in downtown Boston.
"Myles told me he just loved pulling that off, saying `It was just
like Hollywood,'" Mr. Daly says.
Mr. Connor's longtime attorney, Martin Leppo of Boston, confirms
that
he was able to arrange for the federal and state sentences to run
concurrently -- allowing his client to get out of jail early --
because
of Mr. Connor's help in recovering the Rembrandt. As for Mr. Connor
arranging the Rembrandt theft, Mr. Leppo says, "I never heard that,
and
Myles has said that lots of facts have been distorted" by FBI agents.
Another event, in 1975, was to have repercussions much later. A
burglar crept into an Amherst College gallery in Amherst, Mass., one
night, stealing several paintings and Indian artifacts. The FBI's Mr.
Daly says Mr. Connor later told him that he had personally pulled off
the burglary. The Amherst paintings didn't surface until 14 years
later.
Mr. Connor, meanwhile, played a role in another art case. In the
wealthy Boston suburb of Cohasset, a pool party was getting under way
in
the summer of 1978. At the party, a former baby sitter for the wealthy
Arthur Herrington family began describing valuable paintings hanging
in
the Herringtons' living room.
A few nights later, thieves crept into the Herrington house and
made
off with six paintings, including a Rembrandt, an El Greco and a
Pieter
Brueghel, as well as two Chinese Ming vases. A year later, Boston
detectives recovered the art in Boston's Dorchester neighborhood, an
old
haunt of Mr. Connor's.
Mr. Henshaw, a Boston attorney who represented the Herrington
family,
says Mr. Connor arranged for the return of the art. The two men who
had
stolen the art later pleaded guilty. Mr. Connor was never charged.
Mr. Connor nevertheless spent from 1979 to 1985 in Massachusetts
jails. He had been convicted of advising two thugs how to murder two
teenage girls, but his conviction was overturned on appeal, and he was
acquitted at a second trial.
Mr. Connor moved to a farm near Lexington, Ky. There he told a
neighbor about stolen art he wanted to sell, according to federal-
court
documents. The neighbor said he knew just the man to buy it. (The
neighbor, once a petty crook himself, telephoned Alan Medina, a
Bloomington FBI agent he knew. The FBI decided to set up another
sting.)
According to Judge Mills's written ruling on file in federal court
in
Springfield, Mr. Connor and his neighbor drove to the Ramada Inn in
Bloomington, where in December 1988 they met "Joe." Joe was actually
FBI
Agent Daly, who for the next four months was to deal with Mr. Connor
under the pretext of being interested in stolen art for resale in
Asia.
While hidden FBI cameras videotaped the scene, Mr. Connor and his
neighbor hauled in a grandfather clock they had brought in a pickup
truck. Saying he had "liberated" the clock from an estate, Mr. Connor
struck a deal to sell it to Joe for $10,000.
"At first we weren't sure where the clock was from," Mr. Daly says.
The clock, it turned out, was made by famed 18th-century American
clockmaker Simon Willard and had been stolen from the Woolworth estate
16 years earlier.
Mr. Connor returned to Kentucky. But as weeks rolled by, he began
phoning Joe to negotiate additional deals. In January 1989, Mr. Connor
again drove to Bloomington from Kentucky, this time bringing two
paintings, one by Henrick Cornelisz, the other by Pieter Lastman,
according to Judge Mills's ruling. After haggling, the undercover FBI
agent gave Mr. Connor $10,000, with the balance of the $60,000 price
for
both paintings to be paid later.
The FBI rushed the pictures to Chicago's Art Institute, where a
curator identified the paintings, according to an internal FBI report
on
file in Springfield federal court. They were among the artworks which
had been stolen 14 years earlier from Amherst College.
Now Mr. Connor began talking of selling drugs. "He said he could
set
up a regular pipeline to supply students" at the Illinois State
University campus near Bloomington, Mr. Daly recalls. The agent agreed
to advance $25,000 to Mr. Connor to buy cocaine in Florida; the two
planned a meeting in a sushi bar in a terminal at Boston's Logan
Airport, where the undercover agent was to hand over a briefcase with
the cash.
On the appointed day Mr. Daly, posing as Joe, was in the sushi bar,
with six armed FBI agents in plainclothes scattered around to provide
protection if necessary. Mr. Connor walked in, not knowing that he was
being followed by several undercover Massachusetts state troopers. The
troopers had picked up Mr. Connor's trail shortly after his return to
Massachusetts -- and they were unaware they were walking into the
midst
of an FBI sting.
"Myles and I could just feel all the surveillance, and things were
getting very tense," recalls FBI Agent Daly. The two bolted down their
sushi; Mr. Connor picked up the briefcase with the $25,000, then
walked
out of the restaurant unchallenged, shortly afterward boarding a jet
for
Fort Lauderdale, Fla. (It was only later that the FBI men and the
troopers learned of each other's presence in the restaurant.)
A week later, in March 1989, Mr. Connor returned to Bloomington
with
a kilogram of cocaine. While hidden FBI cameras recorded, Mr. Connor
turned over the cocaine in a townhouse the FBI had rented. Moments
later, as "Joe" was about to leave, an FBI SWAT team burst in, threw
Mr.
Connor onto a bed, handcuffed him and arrested him.
By June, Mr. Connor had hatched a plan to escape from the Menard
County jail, near Springfield, where he was being held awaiting trial.
According to an affidavit by U.S. Marshall Mark McClish filed in
Springfield federal court, Mr. Connor had a cellmate telephone Mr.
Connor's girlfriend in Boston, who had another friend send a book to
the
cellmate via Federal Express. In its binding, the book contained four
hidden hacksaw blades. When the cellmate got scared and informed
guards,
a search of the cell disclosed a five-inch cut had been made in the
ceiling.
Pretending the escape had been carried out successfully, an
undercover FBI agent called the Boston girlfriend, who then had a
second
girlfriend speed to Menard County with black dye to color Mr. Connor's
red hair, a razor to shave his beard and a .38-caliber revolver.
Arrested by federal agents, both women pleaded guilty in Springfield
federal court to conspiring to aid the planned escape.
Mr. Connor pleaded guilty to transporting stolen property,
distributing drugs and attempted escape. He cooperated with
prosecutors
by arranging the return of Indian artifacts that had also been stolen
from Amherst College. And on July 16, 1990, standing before Judge
Mills
for sentencing, he asked for leniency.
"The world is a stage, and each must play his part," Mr. Connor
said.
His role really wasn't so bad, he argued, not even having hacksaw
blades
smuggled in for an escape. "Bringing hacksaw blades into an
institution
. . . in Massachusetts, it's kind of a normal thing," he said.
As for dealing in stolen art and drugs, he did that only because he
had fallen in with bad people, Mr. Connor said. He concluded: "Yes, I
did what I did do. And you can believe me that I'm sorry for it. You
can
believe that I would never do it again."
Judge Mills was unconvinced. "Each time in the past you've been
nailed with something . . . you'll come in and plead and you'll barter
off this and you'll barter off that. And all of a sudden another piece
of antiquary will surface."
After reviewing Mr. Connor's record, the judge voiced his "rotten
to
the core" description. Then he added: "You've done nothing but hurt,
and
take, steal, barter, deal in stolen property, weapons involved,
attempted escape. . . . We simply don't need you, Mr. Connor."
Judge Mills meted out a 20-year jail sentence, double what federal
guidelines called for. The sentence was overturned by the U.S. Court
of
Appeals in Chicago, and another federal judge gave Mr. Connor his
current 11-year sentence.
Whether Mr. Connor has information on the Gardner treasures may not
become evident for weeks. The U.S. attorney's staff in Boston has been
talking with his attorney, Mr. Leppo, but so far without success.
Mr. Leppo sounds optimistic. "Myles knows all kinds of people in
the
art world," he says, "people in the legitimate art world and people on
the far side of the law, so if there's anybody who can get the Gardner
art back, it's Myles."
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