Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/335553 
Year of Publication: 
2012
Series/Report no.: 
John M. Olin Center for Studies in Law, Economics, and Public Policy Research Paper No. 438
UCLA School of Law, Law-Economics Research Paper No. 12-05
Publisher: 
SSRN, Rochester, NY
Abstract: 
Recent evidence from the field (Hossain and List, 2009) suggests that contracts framed in terms of a loss (a deduction is taken for failing to meet a threshold) lead to greater effort than contracts framed in terms of a gain (a bonus is given for meeting a threshold). We investigate two explanations for this framing effect in a laboratory setting. First, we find that the loss frame communicates the expectation that achieving the bonus is the default and that our subjects comply with this expectation. Second, we find evidence for an endowment effect, even though the bonus is just a monetary payment that subjects do not even have in their possession.
Subjects: 
Contract design
JEL: 
K12
C91
L14
J41
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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