3. 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 Figure A: Before 1996 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 3.5 explicitly on the TWA's performance in the government's ranking of on-time performance. Under this program, each TWA 25 Fraction of Flights ( employee would receive a payment of between $65 and $100 in N any month in which TWA is placed at or near the top of the DOT 1.5 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 10 20 30 40 delay time). Delay Time (minutes) Figure B; After 1996 3-1. (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). 3.5 3-2. (1 point) The pattern in Figure B is most likely driven by gaming Fraction of Flights (96) 2.5 behavior. 15 a. threshold b. rachet c. adverse selection d. loss-aversion -10 10 30 40 Delay Time (minutes)