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

Jonathan de Quidt, Francesco Fallucchi, Felix Kolle, Daniele Nosenzo (Lead Author), Simone Quercia

Research output: Working paper

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.
Original languageEnglish
PublisherCentre for Decision Research and Experimental Economics, University of Nottingham
Volume2016-01
Publication statusPublished - Feb 2016

Publication series

NameCeDEx Discussion Paper Series
PublisherCentre for Decision Research and Experimental Economics
No.2016-01
ISSN (Print)1749-3293

Keywords

  • contract framing
  • bonus
  • penalty
  • fine
  • Loss aversion

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