Stretch It But Don't Break It: The Hidden Risk of Contract Framing.

Brooks, Richard R. W.; Stremitzer, Alexander; Tontrup, Stephan

doi:10.2139/ssrn.2353733

Cited by 8 publications

(18 citation statements)

References 30 publications

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“…This choice is in line with previous experimental studies of contracting behavior (see, e.g. Brooks et al for a study of quality thresholds using a task involving counting the “1” digits in 200 figures between 1 and 9, designed to hone in on effort). As suggested above, while we are interested in understanding the effect of increasing or decreasing specificity on people's compliance and performance, we are not comparing the two extreme conditions as some of the other studies on specificity have suggested (Chou et al .…”

Section: Experimental Methodssupporting

confidence: 58%

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Experimental analysis of the effect of standards on compliance and performance

Boussalis

Feldman

Smith

2017

Regulation & Governance

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Laws can be written along a spectrum of specificity, ranging from vague standards to more detailed rules with particular examples. Behavioral and legal scholarship each present conflicting views about the optimal degree of specificity with which laws should be designed. From a behavioral standpoint, specificity is important to help people understand their goals and use their cognitive resources in a focused manner. At the same time, ambiguity in the law can even encourage good people to engage in creative interpretations of legal requirements, allowing them to justify unethical behavior, with limited awareness of the meaning of that behavior. By contrast, theories of crowding out, trust, and cooperation suggest that specificity can create resentment and lead to under-compliance and under-performance. These conflicting views about the effects of specificity serve as the background for this experimental project. This paper studies the effects of specificity on behavior in response to a directive that shares important features with the law. First, we examine the effect of specificity on compliance (following a directive) versus performance (beyond a minimum threshold). Second, we compare the controlling, limiting effects of specificity with its instructive, informative effects by comparing the interaction between specificity and monitoring with the interaction between specificity and good faith. We hypothesized that the combination of specificity and monitoring enhances the effect of specificity on compliance but harms performance and trust, whereas the combination of specificity and good faith enhances both the informative goal-setting aspects of specificity and people's sense of commitment. The study employs an experimental design in which subjects edit a document after being exposed to detailed (vague) instructions, with (without) a reference to good faith, and with (without) monitoring (through sanctioning). The assignments were designed in such a way that people could engage in various levels of editing (both required and not required, reasonable and more than reasonable), allowing us to measure distinctly both compliance and performance. Our results suggest that when participants require information and guidance, as in the case of editing a document, specificity increases performance even beyond what is required relative to a vague standard condition.

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Section: Experimental Methodssupporting

confidence: 58%

“…More recently, experiments are being conducted to test the effect of specific goals for performance (see, e.g. Brooks et al ). At the same time, good faith is a much‐discussed, non‐waivable feature that law reads into contracts.…”

Section: Discussionmentioning

confidence: 99%

Experimental analysis of the effect of standards on compliance and performance

Boussalis

Feldman

Smith

2017

Regulation & Governance

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“…Albeit more realistic, we feel it would be virtually impossible with such a design to isolate and disentangle the effect of each of the two errors and thus assess the marginal impact of each type of error on individual performance. For an example of such a design seeBrooks et al (2014).…”

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confidence: 99%

Loss averse agents and lenient supervisors in performance appraisal

Marchegiani¹,

Reggiani

Rizzolli

2016

Journal of Economic Behavior & Organization

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A consistent empirical literature shows that in many organizations supervisors systemati- cally overrate their employees’ performance. Such leniency bias is at odds with the standard principal-agent model and has been explained with causes that range from social interac- tions to fairness concerns and to collusive behavior between the supervisor and the agent. We show that the principal-agent model, extended to consider loss-aversion and reference- dependent preferences, predicts that the leniency bias is comparatively less detrimental to effort provision than the severity bias. We test this prediction with a laboratory experi- ment where we demonstrate that failing to reward deserving agents is significantly more detrimental than rewarding undeserving agents. This offers a novel explanation as to why supervisors tend to be lenient in their appraisals

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“…In her study, lab participants indicated a preference between each of an increasing sequence of fixed payments, and a contingent contract which was either bonus or penalty framed. The mean valuation of the bonus contract was higher in one treatment, and lower in another, although the sample sizes are small so robust statistical inference on this outcome is difficult Brooks et al (2013). study only penalty framed incentives, varying the size of the target below which penalties are incurred.…”

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confidence: 98%

Your Loss is My Gain: A Recruitment Experiment with Framed Incentives

Quidt

2017

SSRN Journal

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Stretch It But Don't Break It: The Hidden Risk of Contract Framing.

Cited by 8 publications

References 30 publications

Experimental analysis of the effect of standards on compliance and performance

Experimental analysis of the effect of standards on compliance and performance

Loss averse agents and lenient supervisors in performance appraisal

Your Loss is My Gain: A Recruitment Experiment with Framed Incentives

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