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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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    References listed on IDEAS

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    More about this item

    Keywords

    Time pressure; Deadline-dependent incentive schemes; Loss aversion; Choking under pressure; Laboratory experiment;

    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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