The hidden costs of malus contracts
Last registered on December 02, 2017

Pre-Trial

Trial Information
General Information
Title
The hidden costs of malus contracts
RCT ID
AEARCTR-0002605
Initial registration date
December 01, 2017
Last updated
December 02, 2017 7:16 PM EST
Location(s)

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Primary Investigator
Affiliation
University of Bern
Other Primary Investigator(s)
PI Affiliation
University of Bern
PI Affiliation
University of Bern
Additional Trial Information
Status
In development
Start date
2017-12-05
End date
2018-12-31
Secondary IDs
Abstract
This laboratory experiment is aimed at examining the effect of malus contracts in a principal agent relationship. In particular, we want to understand whether the agent’s experience of a malus (having to pay back money to the principal) subsequently leads to a decrease in reciprocal behavior of the agent toward the principal. In order to study this question we will compare behavior in a malus treatment to behavior in a payoff-equivalent bonus treatment. Reciprocity is measured as behavior of the agent in the role of the trustee in a trust game. We will also consider whether the principal anticipates the agent’s choice by studying her decision in the role of the trustor. *In addition, we will examine the contract choice of the principal for the initial real-effort task, the number of tasks solved by the agent in the real-effort task and the impact of loss and risk aversion on all of the above outcomes. The intervention is a between-subject design.
External Link(s)
Registration Citation
Citation
Bieberstein, Frauke, Andrea Essl and Kathrin Friedrich. 2017. "The hidden costs of malus contracts." AEA RCT Registry. December 02. https://www.socialscienceregistry.org/trials/2605/history/23667
Experimental Details
Interventions
Intervention(s)
Between-subject design. Two treatments: malus treatment and gain treatment.
Intervention Start Date
2017-12-05
Intervention End Date
2017-12-06
Primary Outcomes
Primary Outcomes (end points)
Money returned by trustee (the agent) in a trust game. In addition, we will consider money transferred by trustor (principal), contract choice of principal, number of tasks solved by agent in real-effort task, impact of loss and risk aversion on above outcomes. We will control for individual differences as given by the questionnaire.
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
Between-subject design. Pairs of principal and agent are randomly formed. The principal decides on the contract for the agent for a real-effort task. In the malus (bonus) treatment, the principal can choose between a fixed wage and a malus (bonus) contract. After the initial payments, the agent works on the real-effort task and receives the bonus/pays the malus depending on the treatment. Then, a trust game is played with the principal as trustor and the agent as trustee. In addition, we elicit individual loss and risk aversion and baseline performance. Finally, participants fill out an unincentivized questionnaire.
Experimental Design Details
Not available
Randomization Method
Computer (lab experiment)
Randomization Unit
Individual
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
-
Sample size: planned number of observations
In total about 170 participants
Sample size (or number of clusters) by treatment arms
About 85 participants in bonus treatment, about 85 participants in malus treatment
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
IRB Approval Date
IRB Approval Number