tradeoff between risk and incentives. Subjects in our experiments choose their compensation for performing a real-effort task …) the reference point in a risk-free environment behave risk averse (seeking) in risky environments. In a second experiment … rate contracts in the presence of output risk, and provide novel insights that reference dependent preferences affect the …

I show that stochastic contracts generate powerful incentives when agents suffer from probability distortion. When … optimal. A theoretical framework and an experiment demonstrate that stochastic contracts implemented with small probabilities …, which expose the agent to a high degree of risk, generate higher performance than cost-equivalent contracts with lower or no …

One of the standard predictions of the agency theory is that more incentives can be given to agents with lower risk … obtain that lower agent’s risk aversion unambiguously leads to higher incentives when the technology function linking … efficiency and riskiness is elastic, while the risk aversion–incentive relationship can be positive when this function is rigid. …

limitless. The potential link between compensation and risk behavior is analyzed in this paper. A behavioral experiment with … students shows that unilaterally constructed incentive schemes encourage excess risk-taking. Thus common bonus …Compensation schemes have been blamed for encouraging excess risk-taking on the part of managers within the financial …

-averse investors buy more of the safe asset. Applying this intuition to incentive pay contracts, we develop a model and an experiment … the literature on worker selection into incentive pay contracts by showing that lower effort of the risk-averse is another …An investor's choice between safe and risky assets has long been seen as a behavior toward risk: more risk …

We investigated the effect of large changes in financial incentives on the process of decision-making by measuring … increased risk aversion and physiological arousal, and by shifts in attention toward safer alternatives. These effects were … manifested both within and between individuals. We find no evidence that heightened risk aversion is a mistake. To capture the …

Higher order risk preferences are important determinants of economic behaviour. We apply behavioural insights to this … topic: we measure higher order risk preferences for pure gains and pure losses by controlling the reference point. We find a … reflection effect not only for second order risk preferences, as in Kahneman and Tversky 1979, but also for higher order risk …

tradeoff between risk and incentives. Subjects in our experiments choose their compensation for performing a real-effort task …) the reference point in a risk-free environment behave risk averse (seeking) in risky environments. In a second experiment … rate contracts in the presence of output risk, and provide novel insights that reference dependent preferences affect the …