Title page for ETD etd-04112008-185426

Type of Document

Dissertation

Author

Brink, Alisa Gabrielle

Author's Email Address

agp02@fsu.edu

URN

etd-04112008-185426

Title

The Effects of Risk Preference and Loss Aversion on Individual Behavior under Bonus, Penalty, and Combined Contract Frames

Degree

Doctor of Philosophy

Department

Accounting, Department of

Advisory Committee

Advisor Name	Title
Douglas E. Stevens	Committee Chair
Gerald R. Ferris	Committee Member
Martin G. Fennema	Committee Member
Timothy C. Salmon	Committee Member

Keywords

Incentives
Compensation Contracts
Bonus
Penalty
Frames
Loss Aversion

Date of Defense

2008-04-04

Availability

unrestricted

Abstract

This study examines the effects of risk preference and loss aversion on individual responses to differently framed incentive contracts. Individual risk and loss preferences are measured using the Holt and Laury (2002) measure of risk aversion and a new measure of loss aversion that is developed in this study. The relationship between these preferences and behavior under economically equivalent contracts of different frames is examined using two experiments. Participants are assigned to a contract that is framed as either having a bonus incentive, penalty incentive, or combination of bonus and penalty incentives. In experiment one, participants make choices between increasingly attractive incentive contracts and a flat salary, as in Luft (1994). Experiment two assigns participants to an incentive contract and asks them to make an effort choice. Results indicate heterogeneous risk and loss preferences, and these preferences explain some of the behavior observed between different contract frames. Results also indicate that contracts that combine bonus and penalty incentives are less attractive to participants than bonus or penalty-only incentives, but lead to higher effort choices.

Files

Filename		Size	Approximate Download Time (Hours:Minutes:Seconds)
Filename		Size	28.8 Modem	56K Modem	ISDN (64 Kb)	ISDN (128 Kb)	Higher-speed Access
	BrinkADissertation.pdf	6.13 Mb	00:28:22	00:14:35	00:12:46	00:06:23	00:00:32