Revisiting the Trade-off Between Risk and Incentives: The Shocking Effect of Random Shocks?

• 成果类型: Article
• 署名作者: Corgnet, Brice; Hernan-Gonzalez, Roberto
• 署名单位: emlyon business school; Centre National de la Recherche Scientifique (CNRS); Ecole Normale Superieure de Lyon (ENS de LYON); Universite Claude Bernard Lyon 1; Universite Jean Monnet; Universite Lyon 2; Universite Bourgogne Europe; Burgundy School of Business
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2017.2914
• 发表日期: 2019
• 页码: 1096-1114
• 关键词: Principal-agent models; Incentive theory; loss aversion; laboratory experiments

摘要

Despite its central role in the theory of incentives, empirical evidence of a trade-off between risk and incentives remains scarce. We reexamine this trade-off in a workplace lab environment and find that, in line with theory, principals increase fixed pay while lowering performance pay when the relationship between effort and output is noisier. Unexpectedly, agents produce substantially more in the noisy environment than in the baseline despite weaker incentives. In addition, principals' earnings are significantly higher in the noisy environment. We show that these findings can be accounted for when agents maximize a non-CARA utility function or when they exhibit loss aversion.