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Bonus versus Penalty: How Robust Are the Effects of Contract Framing?

Jonathan de Quidt (), Francesco Fallucchi (), Felix Koelle, Daniele Nosenzo and Simone Quercia
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Felix Koelle: Center for Social and Economic Behavior, University of Cologne

Authors registered in the RePEc Author Service: Felix Kölle ()

No 2016-01, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

Abstract: We study the relative effectiveness of contracts that are framed either in terms of bonuses or penalties. In one set of treatments subjects know at the time of effort provision whether they have achieved the bonus / avoided the penalty. In another set of treatments subjects only learn the success of their performance at the end of the task. We fail to observe a contract framing effect in either condition: effort provision is statistically indistinguishable under bonus and penalty contracts. We discuss possible reasons for this null result.

Keywords: contract framing; bonus; penalty; fine; loss aversion (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-hrm
Date: 2016-01
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Journal Article: Bonus versus penalty: How robust are the effects of contract framing? (2017) Downloads
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