The effect of ambiguity aversion on reward scheme choice
Christian Kellner () and
Gerhard Riener
Economics Letters, 2014, vol. 125, issue 1, 134-137
Abstract:
We test the implications of ambiguity aversion in a principal–agent problem with multiple agents. Models of ambiguity aversion suggest that, under ambiguity, comparative compensation schemes may become more attractive than independent wage contracts. We test this by presenting agents with a choice between comparative reward schemes and independent contracts, which are designed such that under uncertainty about output distributions (that is, under ambiguity), ambiguity averse agents should typically prefer comparative reward schemes, independent of their degree of risk aversion. We indeed find that the share of agents who choose the comparative scheme is higher under ambiguity.
Keywords: Ambiguity aversion; Comparative compensation schemes; Ellsberg urn; Contract design (search for similar items in EconPapers)
JEL-codes: D01 D03 D81 M55 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176514003152
Full text for ScienceDirect subscribers only
Related works:
Working Paper: The effect of ambiguity aversion on reward scheme choice (2012) 
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:eee:ecolet:v:125:y:2014:i:1:p:134-137
DOI: 10.1016/j.econlet.2014.08.025
Access Statistics for this article
Economics Letters is currently edited by Economics Letters Editorial Office
More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().