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. / A Dissertation submitted to the Department of Accounting in partial fulfillment of the requirements for the degree of Doctor of Philosophy. / Spring Semester, 2008. / April 4, 2008. / Incentives, Compensation Contracts, Bonus, Penalty, Frames, Loss Aversion / Includes bibliographical references. / Douglas E. Stevens, Professor Directing Dissertation; Timothy C. Salmon, Outside Committee Member; Martin G. Fennema, Committee Member; Gerald R. Ferris, Committee Member.
| Identifer | oai:union.ndltd.org:fsu.edu/oai:fsu.digital.flvc.org:fsu_181226 |
| Contributors | Brink, Alisa Gabrielle, 1979- (authoraut), Stevens, Douglas E. (professor directing dissertation), Salmon, Timothy C. (outside committee member), Fennema, Martin G. (committee member), Ferris, Gerald R. (committee member), Department of Accounting (degree granting department), Florida State University (degree granting institution) |
| Publisher | Florida State University, Florida State University |
| Source Sets | Florida State University |
| Language | English, English |
| Detected Language | English |
| Type | Text, text |
| Format | 1 online resource, computer, application/pdf |
| Rights | This Item is protected by copyright and/or related rights. You are free to use this Item in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s). The copyright in theses and dissertations completed at Florida State University is held by the students who author them. |
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