Loss aversion and the quantity–quality tradeoff

Rubin, Jared; Samek, Anya; Sheremeta, Roman M.

doi:10.1007/s10683-017-9544-1

Cited by 22 publications

(12 citation statements)

References 54 publications

(39 reference statements)

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“…Insofar as providing unsorted beans is indicative of cheating, we find the same. These findings complement Rubin et al (2018) who found that loss averse agents sacrifice quality for quantity, compared to agents who are not loss averse. We find that leveraging loss aversion through a clawback regime further induces loss averse agents to sacrifice quality for quantity.…”

Section: << Insert Table 3 About Here >>supporting

confidence: 83%

“…That is, the incentive invites a shift towards low-expected returns, low-risk activities. In a lab setting with students solving simple math tasks, Rubin et al (2018) demonstrate that behavioral characteristics mediate the way that agents respond to quality-quantity incentives. Specifically, loss averse agents shift their attention from producing quality to producing quantity when quality is only weakly incentivized (even if it is observable to the principal).…”

Section: Introductionmentioning

confidence: 93%

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Incentive spillovers in the workplace: Evidence from two field experiments

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2021

Journal of Economic Behavior & Organization

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Incomplete contracts are the rule rather than the exception, and any incentive scheme faces the risk of improving performance on incented aspects of a task at the detriment of performance on non-incented aspects. Recent research documents the effect of loss-framed versus gain-framed incentives on incentivized behavior, but how do such incentives affect overall performance? We explore potential trade-offs by conducting field experiments in an artificial "workplace". We explore two types of incentive spillovers: those contemporaneous to the incented task and those subsequent to the incented task. We report three main results. First, consonant with the extant literature, a loss aversion incentive induces greater effort on the incented task. Second, offsetting this productivity gain, we find that the quality of work decreases if quality is not specified in the incentive contract. Third, we find no evidence of harmful spillover effects to subsequent tasks; if anything, the loss aversion incentive induces more effort in subsequent tasks. Taken together, our results highlight that measuring and accounting for incentive spillovers are important when considering their overall impact.

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Section: << Insert Table 3 About Here >>supporting

confidence: 83%

Section: Introductionmentioning

confidence: 93%

Incentive spillovers in the workplace: Evidence from two field experiments

Bulte

List

Soest

2021

Journal of Economic Behavior & Organization

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“…Management research has found evidence of a tradeoff relationship between service quantity and quality in which increased effort placed on higher quality reduces the number of customers employees serve and vice versa (Förster et al 2003;Oliva and Sterman 2001;Wood and Locke 1990). A recent study (Rubin et al 2018) also found that loss aversion plays a role in the tradeoff between quantity and quality. Loss-avoidant participants shift their attention from quantity to quality when given a weak incentive.…”

Section: Introductionmentioning

confidence: 86%

Does haste always make waste? Service quantity, service quality, and incentives in speed-intensive service firms

et al. 2018

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Research demonstrates a tradeoff between service quantity and service quality that creates a tension for firms who wish to incentivize both aspects of service performance. We propose a category of speed-intensive services in which prompt responsiveness is the primary driver of service quality. In these firms, service quantity and quality should exhibit a positive interrelationship. Daily data on service quantity and quality performance were collected for 24 months, for a total of 1414 observations, from a telephone directory service firm, an affiliate of major telecommunication firm in an Asian country. We use a generalized method of moments (GMM) estimation to test their interrelationship and the effect of financial incentives on service performance. Contrary to the typical tradeoff effect, the results reveal that service quantity positively affects service quality performance and vice versa. In addition, we surprisingly find that incentives have no effect on service quantity performance and decrease service quality performance, and that overall performance declines with employee experience. This suggests that these firms do not face a tradeoff between service quantity and quality, but may face a long-term tradeoff between customer satisfaction and employee satisfaction.

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“…Meanwhile, other has failed to detect a difference between the two frames (de Quidt et al, 2017;DellaVigna and Pope 2018;Grolleau et al, 2016). 2 A number of studies have considered the effects of different types of incentives for quality (Bracha and Fershtman 2013;Carpenter et al, 2010;Eckartz et al, 2012;Hammermann and Mohnen 2014;Rubin et al, 2018;Shurchkov 2012), while others have studied the effects of incentivising quantity on quality (Al-Ubaydli et al, 2015;Fest et al, 2019;Green, 2014;Greiner et al, 2011;Tonin and Vlassopoulos 2015). A few scholars have explored the relative effects and complementarity of incentives for quality and quantity (Kachelmeier et al 2008;Laske and Schröder 2017).…”

Section: Introductionmentioning

confidence: 99%

Effects of incentive framing on performance and effort: evidence from a medically framed experiment

Lagarde

Blaauw

2021

J Econ Sci Assoc

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We study the effects on performance of incentives framed as gains or losses, as well as the effort channels through which individuals increase performance. We also explore potential spill-over effects on a non-incentivised activity. Subjects participated in a medically framed real-effort task under one of the three contracts, varying the type of performance incentive received: (1) no incentive; (2) incentive framed as a gain; or (3) incentive framed as a loss. We find that performance improved similarly with incentives framed as losses or gains. However, individuals increase performance differently under the two frames: potential losses increase participants’ performance through a greater attention (fewer mistakes), while bonuses increase the time spent on the rewarded activity. There is no spill-over effect, either negative or positive, on the non-incentivised activity. We discuss the meaning and implications of our results for the design of performance contracts.

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Loss aversion and the quantity–quality tradeoff

Cited by 22 publications

References 54 publications

Incentive spillovers in the workplace: Evidence from two field experiments

Incentive spillovers in the workplace: Evidence from two field experiments

Does haste always make waste? Service quantity, service quality, and incentives in speed-intensive service firms

Effects of incentive framing on performance and effort: evidence from a medically framed experiment

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