Essl, Andrea; Friedrich, Kathrin; Schumacher, Stefanie; von Bieberstein, Frauke (2023). Penalty contracts: is it all about paying the cash upfront? Review of Managerial Science, 18(1), pp. 161-180. Springer 10.1007/s11846-022-00617-6
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We experimentally investigate the relevance of a cash upfront payment for the effort-enhancing effect of penalty contracts. We find that penalty contracts where participants receive the upfront payment physically before working on a real effort task induce more effort than penalty contracts where participants are only informed about the upfront payment. When comparing penalty contracts with economically-equivalent bonus contracts, we find that penalty contracts lead to higher effort provision than bonus contracts, but only if participants physically receive the upfront cash payment in advance. We suggest that the higher salience of the cash upfront payment might be a core driver of the detected framing effect. Our findings emphasize the importance of experimental design choices when studying framed incentive contracts.
Item Type: |
Journal Article (Original Article) |
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Division/Institute: |
03 Faculty of Business, Economics and Social Sciences > Department of Business Management > Institute of Organization and Human Resource Management > Organisation 03 Faculty of Business, Economics and Social Sciences > Department of Business Management > Institute of Organization and Human Resource Management |
UniBE Contributor: |
Essl, Andrea, Friedrich, Kathrin Anna, Schumacher, Stefanie, von Bieberstein, Frauke |
Subjects: |
600 Technology > 650 Management & public relations 300 Social sciences, sociology & anthropology > 330 Economics |
ISSN: |
1863-6683 |
Publisher: |
Springer |
Language: |
English |
Submitter: |
Andrea Essl |
Date Deposited: |
05 May 2023 16:35 |
Last Modified: |
07 Jan 2024 02:23 |
Publisher DOI: |
10.1007/s11846-022-00617-6 |
Uncontrolled Keywords: |
Penalty contract, contract framing, loss framing, cash upfront payment, laboratory experiment |
BORIS DOI: |
10.48350/182351 |
URI: |
https://boris.unibe.ch/id/eprint/182351 |
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