Choosing between and allocating time across contracts: an experimental study

There are two ways in which people usually engage with contracts—compensation schemes to execute tasks. They can choose between them (contract choice), or allocate time across them (contract time allocation). In this paper, we study how people behave in each of these problems. A standard model suggests that drafting a cost-effective contract that both induces an agent to choose it and allocate time to it presents a significant challenge. However, our experimental results indicate that this tradeoff might be less pronounced than the model predicts due to what we call the attractiveness bias–a tendency for subjects to allocate more time to contracts they find appealing, even when the model suggests they should get relatively little time.