Loss-Framed Incentives and Employee (Mis-)Behavior

Eszter Czibor (), Danny Hsu (), David Jimenez-Gomez (), Susanne Neckermann and Burcu Subasi ()
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Eszter Czibor: Consortium on Compensating Income Variation, Department of Economics, University of Iceland, 102 Reykjavík, Iceland
Danny Hsu: Erasmus School of Economics, 3062 PA Rotterdam, Netherlands
David Jimenez-Gomez: Department of Economics, University of Alicante, 03690 San Vicente del Raspeig, Alicante, Spain
Burcu Subasi: School of Financial and Economic Management, Hanze University of Applied Sciences, 9747 AS Groningen, Netherlands

Management Science, 2022, vol. 68, issue 10, 7518-7537

Abstract: This paper explores how loss-framed incentives affect behavior in a multitasking environment in which participants have more than one way of recovering (expected) losses. In a real-effort laboratory experiment, we offer participants task incentives that are framed as either a reward (gain) or penalty (loss). We study their responses along three dimensions: performance in the incentivized task, theft, and voluntary provision of help. We find that framing incentives as a penalty rather than as a reward does not significantly improve task performance, but it increases theft and leads to a small and insignificant reduction in the share of participants willing to help the experimenter. Secondary analyses based on our theoretical framework help us pin down the mechanism at play and suggest that loss aversion drives participants’ response. Our findings have important implications for incentive design in practice.

Keywords: loss-framed incentives; multitasking; incentive design; stealing (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:68:y:2022:i:10:p:7518-7537

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