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Choking under time pressure: The influence of deadline-dependent bonus and malus incentive schemes on performance

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  • Essl, Andrea
  • Jaussi, Stefanie

Abstract

Many economically relevant activities are executed under notable time pressures. Incentivized deadlines are often the reason people feel pressured. In such an environment, individual preferences can predict performance. Through a laboratory experiment, we examine the predictive power of individual loss aversion on performance under deadline-dependent incentives. Participants worked on a real effort task under two payoff-equivalent contracts framed in bonus and malus terms. The results show lower performance for individuals with high loss aversion when working under a malus contract. These individuals needed more time to reply and were less able to avoid maluses than other individuals. Choking can explain this observed behavior.

Suggested Citation

  • Essl, Andrea & Jaussi, Stefanie, 2017. "Choking under time pressure: The influence of deadline-dependent bonus and malus incentive schemes on performance," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 127-137.
    • Handle: RePEc:eee:jeborg:v:133:y:2017:i:c:p:127-137
    DOI: 10.1016/j.jebo.2016.11.001
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    Cited by:

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    3. Aurélien Baillon & Zhenxing Huang & Asli Selim & Peter P. Wakker, 2018. "Measuring Ambiguity Attitudes for All (Natural) Events," Econometrica, Econometric Society, vol. 86(5), pages 1839-1858, September.
    4. De Paola, Maria & Gioia, Francesca & Pupo, Valeria, 2020. "Selection and Incentives under Time Pressure: The Importance of Framing," IZA Discussion Papers 13474, Institute of Labor Economics (IZA).
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    6. Niu, Weining & Zeng, Qingduo, 2018. "Corporate financing with loss aversion and disagreement," Finance Research Letters, Elsevier, vol. 27(C), pages 80-90.
    7. Huigang Liang & Yajiong Xue, 2022. "Save Face or Save Life: Physicians’ Dilemma in Using Clinical Decision Support Systems," Information Systems Research, INFORMS, vol. 33(2), pages 737-758, June.

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    More about this item

    Keywords

    Time pressure; Deadline-dependent incentive schemes; Loss aversion; Choking under pressure; Laboratory experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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