Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/224761
Authors: 
Ahrens, Steffen
Bitter, Lea
Bosch-Rosa, Ciril
Year of Publication: 
2020
Series/Report no.: 
Discussion Paper 256
Abstract: 
In this paper we study the effects that loss contracts - prepayments that can be clawbacked later - have on group coordination when there is strategic uncertainty. We compare the choices made by experimental subjects in a minimum effort game. In control sessions, incentives are formulated as a classic gain contract, while in treatment sessions, incentives are framed as an isomorphic loss contract. Our results show that loss contracts reduce the minimum efforts of groups and worsen coordination between group members, both leading to lower payoffs. However, these results depend strongly on the group's gender composition; groups with a larger proportion of women are better at coordinating and exert more effort.
Subjects: 
strategic uncertainty
loss aversion
coordination
contract design
framing
experiment
JEL: 
C91
D84
G11
G41
Document Type: 
Working Paper

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