Framing Contracts: Why Loss Framing Increases Effort

Bonus versus penalty: How robust are the effects of contract framing?

“…In both settings, we find that performance is statistically indistinguishable between bonus and penalty frames. The absence of a contract framing effect when the target is announced is consistent with the findings of Brooks et al (2012), DellaVigna andPope (2016), andGrolleau et al (2016). However, our finding that performance is unresponsive to framing when the target is unannounced contrasts with results reported by Hannan et al (2005), Armantier and Boly (2015), and Imas et al (2017).…”

“…1 (right panel) also shows that three further studies found considerably smaller effects, which are either statistically insignificant (DellaVigna and Pope 2016; Grolleau et al 2016), or only marginally significant (Brooks et al 2012).…”

“…1 relates to whether or not subjects could check during the task whether they had met the performance target and hence their monetary compensation. In Brooks et al (2012), DellaVigna and Pope (2016), Grolleau et al (2016), subjects were told in advance what the target was and could verify their monetary compensation at any point during the experiment.…”

“…3 In DellaVigna and Pope (2016) subjects participated in a real-effort task and received a bonus/penalty based on a performance target that was specified ex-ante. Brooks et al (2012) conducted a chosen-effort experiment where subjects knew in advance whether any level of effort resulted in a bonus/penalty. Grolleau et al (2016) gave subjects pairs of matrices containing numbers and, in each pair, subjects had to find two numbers that added up to ten.…”

Framing Contracts

“…In their study, Brooks, Stremitzer, and Tontrup (2012) take some steps in this direction. In this short comment I will follow their approach and discuss some of the possible reasons why the framing of otherwise identical contracts can have an influence on workers' behavior.…”