Do People Anticipate Loss Aversion

Alex Imas, Sally Sadoff and Anya Samek

Framed Field Experiments from The Field Experiments Website

Abstract: There is growing interest in the use of loss contracts that offer performance incentives as upfront payments that employees can lose. Standard behavioral models predict a tradeoff in the use of loss contracts: employees will work harder under loss contracts than under gain contracts; but, anticipating loss aversion, they will prefer gain contracts to loss contracts. In a series of experiments, we test these predictions by measuring performance and preferences for payoff-equivalent gain and loss contracts. We find that people indeed work harder under loss than gain contracts, as the theory predicts. Surprisingly, rather than a preference for the gain contract, we find that people actually prefer loss contracts. In exploring mechanisms for our results, we find suggestive evidence that people do anticipate loss aversion but select into loss contracts as a commitment device to improve performance.

Date: 2015
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-hrm and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://s3.amazonaws.com/fieldexperiments-papers2/papers/00415.pdf

Related works:
Journal Article: Do People Anticipate Loss Aversion? (2017)
Working Paper: Do People Anticipate Loss Aversion? (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:feb:framed:00415

Access Statistics for this paper

More papers in Framed Field Experiments from The Field Experiments Website
Bibliographic data for series maintained by Francesca Pagnotta ().