Behavioral economists have proposed that incentive contracts result in higher productivity when bonuses are “loss framed”—prepaid then clawed back if targets are unmet. We test this claim in a large-scale field experiment. Holding financial incentives fixed, we randomized the pre- or...

Behavioral economists have proposed that loss-averse employees increase productivity when bonuses are "loss framed"--prepaid then clawed back if targets are unmet. We theoretically document that loss framing raises incentives for costly risk mitigation and for inefficient multitasking,...

When the performances of agents are correlated (because of a common random component), contracts that use information on both the relative and absolute performances of agents theoretically outperform rank-order tournaments and piece-rate schemes. Although the theoretical advantage of such...