Outcome Bias and risk taking in a principal agent setting 3

Last registered on March 07, 2025

View Trial History

Pre-Trial

Trial Information

General Information

Title

Outcome Bias and risk taking in a principal agent setting 3

RCT ID

AEARCTR-0015445

Initial registration date

March 04, 2025

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

March 07, 2025, 7:59 AM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country

Austria

Region

Vienna

Primary Investigator

Name

Moritz Loewenfeld

Affiliation

University of Vienna

Contact Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Status

In development

Start date

2025-03-05

End date

2025-03-31

Keywords

Behavior

Additional Keywords

JEL code(s)

D81

Secondary IDs

Prior work

This trial does not extend or rely on any prior RCTs.

Abstract

I consider a setting of delegated risk taking. Agents choose between a first-order stochastically dominant and a dominated lottery. Principals observe choices and outcomes of both lotteries and then decide whether to award a bonus payment to the agent. The goal of this experiment is to study whether outcome bias (OB), that is a tendency to condition bonus payments on outcomes, can shape the incentives faced by agents and thereby their choices. In particular, I seek to address the following research questions. 1) Can outcome bias in bonus decisions create incentives to choose suboptimal actions? 2) Do agents anticipate the OB of principals correctly and do they adjust their choices accordingly, i.e. can outcome bias induce more choices of sub-optimal actions and thus decrease welfare? I further seek to better understand the mechanisms driving outcome bias.

External Link(s)

Registration Citation

Citation

Loewenfeld, Moritz. 2025. "Outcome Bias and risk taking in a principal agent setting 3." AEA RCT Registry. March 07. https://doi.org/10.1257/rct.15445-1.0

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

I run an online experiment on prolific. For details on the design, see the document "design_pap.pdf".

Intervention (Hidden)

Intervention Start Date

2025-03-05

Intervention End Date

2025-03-31

Primary Outcomes

Primary Outcomes (end points)

Bonus decisions of participants in the role of principal and choices and beliefs of participants in the role of agent. For details, see the document "design_pap.pdf".

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

Agents make a number of decisions between two lotteries on behalf of the principals. Principals decide on bonus payments. Participants are randomly and permanently assigned to the role of either principal or agent. There are two treatments, reward-before and reward-after. In the reward-before treatment, principals make bonus decisions conditional on the agents' choices. In the reward-after treatment, principals can also condition bonus payments on the realized outcomes.
In addition, there are two conditions. In the robustness condition, interactions are one-shot. In the consequences condition, agents are repeatedly matched to the same principal, which implies that principals can influence the agents choices with their bonus decisions.

Experimental Design Details

Randomization Method

Participant are randomized into different treatments and conditions by a computer.

Randomization Unit

The individual.

Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters

The unit of observations is the individual.

Sample size: planned number of observations

I aim for 880 valid submissions.

Sample size (or number of clusters) by treatment arms

There are two conditions (robustness, consequences), two roles (agent and principal), and two treatments (reward-before and reward-after). The target number of participants is 110 valid submissions per role and treatment in the conditions robustness and consequences.

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Supporting Documents and Materials

IRB