Year: 2015
Type: article
Abstract: This study examines the effects of incentive contract framing on two types of misconduct: misreporting and shirking. I conduct a 2x2 between subjects experiment, manipulating incentive contract framing (Bonus/Penalty) and the awareness of the opportunity to misreport (Before Effort/After Effort). I predict and find that (1) penalty contracts cause a higher rate and degree of misreporting, (2) this greater misreporting occurs due to a greater sense of entitlement to the incentive funds, and (3) even though misreporting occurs more with penalties, people shirk more in response to a bonus. Collectively, this study’s theory and results indicate that while penalty contracts can increase effort relative to bonus contracts, they also encourage greater dishonesty in reporting when that effort is not successful.
Author: Jennifer E. Nichol
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2471167783