scholarly journals Risk aversion and effort under an incentive pay scheme with multiplicative noise

2015 ◽  
Vol 3 (2) ◽  
pp. 130-144 ◽  
Author(s):  
Nikolay Zubanov
Keyword(s):  
Treatment Group ◽  
Risk Aversion ◽  
Multiplicative Noise ◽  
Risk Preferences ◽  
Individual Risk ◽  
Control Group ◽  
Incentive Pay ◽  
Risk Averse ◽  
Content Type ◽  
Piece Rate

Purpose – The purpose of this paper is to consider the influence of individual risk preferences on the effectiveness of incentive pay schemes, by examining the link between individual effort and risk aversion in situations where outcome uncertainty multiplies with effort. Such “multiplicative noise” situations are common, occurring whenever payment is awarded per success rather than per attempt. Design/methodology/approach – The paper develops a theoretical model which predicts a negative risk aversion-effort link under multiplicative noise without a performance target (PT), and a weaker negative link once the target is introduced. This model is then taken to the data from a lab experiment where participants were randomly assigned to a control group, which received fixed pay, and a treatment group, which received a piece rate awarded with a certain probability, with and without a PT. Risk aversion is measured with a menu of lottery choices offered at the end of the experiment. Findings – Compared to their peers in the control group, the more risk-averse participants in the treatment group put in progressively less effort in the absence of a PT. The introduction of a PT substantially weakens this negative risk aversion-effort link, so that there are no more significant differences in performance between the more and the less risk averse. Research limitations/implications – The paper’s findings speak to the empirical puzzles of incentive pay schemes backfiring and of the proliferation of PTs. The negative risk aversion-effort link may be one reason behind the failure of incentive schemes to deliver improved performance, whereas the weakening of this link may be one justification for the existence of PTs. Practical implications – In the multiplicative noise environments, managers should take their workers’ risk preferences into account when designing incentive pay schemes. A PT may be a useful motivational tool for the risk-averse workers who are more likely to under-perform. Originality/value – The multiplicative noise environment has been largely overlooked by the existing literature, yet it is common in practice. An example is the work of a sales agent who receives a bonus per sales which succeeds with a certain probability after each customer contact. This paper is one of the first to model, and test experimentally, worker performance in this environment.

AND, INJUSTICE FOR SOME CORRUPT EXCHANGE AND THE RISK-AVERSE OFFICIAL

2004 ◽  
Vol 2 (2) ◽  
Author(s):  
Gary E. Marche
Keyword(s):  
Law Enforcement ◽  
Theoretical Analysis ◽  
Risk Aversion ◽  
Organized Crime ◽  
Risk Preferences ◽  
Risk Averse ◽  
Enforcement Official ◽  
Optimal Law Enforcement

Although corruption and optimal law enforcement literature have addressed the effects of corruption, little has been done to analyze the decision to become corrupt. For example, little is known about risk preferences and how they might affect the nature of a corrupt exchange scheme. To answer this question, a theoretical analysis is developed that considers the noncoercive incentivea and circumstances necessary for a law enforcement official, assumed averse to criminal risk, to choose a corrupt exchange with organized crime that involves murder. Risk-aversion and the severity of the crime involved are shown to reduce the likelihood of detecting the corruption scheme and murder is shown to be optimal. Corruption schemes involving less risk averse offenders are analyzed and compared.

Risk Aversion and Unemployment in an Open Economy

2000 ◽  
Vol 49 (2) ◽  
Author(s):  
Pia Weiß
Keyword(s):  
Risk Aversion ◽  
Open Economy ◽  
Small Open Economy ◽  
Risk Behaviour ◽  
Terms Of Trade ◽  
Individual Risk ◽  
Risk Averse ◽  
Search Frictions ◽  
Long Run ◽  
The Impact

AbstractThe paper analyses the impact which risk aversion has on a small open economy characterised by search frictions on the labour market. It is shown that the long-run qualitative effects caused by a terms-of-trade shock are independent of individual risk behaviour. As far as quantitative aspects are concerned risk aversion always leads to higher equilibrium employment; however the increase in unemployment due to a price shock is the higher the more risk-averse individuals are.

Risk Preferences and Incentives for Evidence Acquisition and Disclosure

2020 ◽  
Vol 36 (2) ◽  
pp. 314-342
Author(s):  
Erin Giffin ◽  
Erik Lillethun
Keyword(s):  
Decision Making ◽  
High Risk ◽  
Optimal Design ◽  
Risk Aversion ◽  
Risk Preferences ◽  
Decision Rules ◽  
Low Risk ◽  
Risk Averse ◽  
Good Decision ◽  
Legal Rules

Abstract Civil disputes feature parties with biased incentives acquiring evidence with costly effort. Evidence may then be revealed at trial or concealed to persuade a judge or jury. Using a persuasion game, we examine how a litigant’s risk preferences influence evidence acquisition incentives. We find that high risk aversion depresses equilibrium evidence acquisition. We then study the problem of designing legal rules to balance good decision making against the costs of acquisition. We characterize the optimal design, which differs from equilibrium decision rules. Notably, for very risk-averse litigants, the design is “over-incentivized” with stronger rewards and punishments than in equilibrium. We find similar results for various common legal rules, including admissibility of evidence and maximum awards. These results have implications for how rules could differentiate between high risk aversion types (e.g., individuals) and low risk aversion types (e.g., corporations) to improve evidence acquisition efficiency.

scholarly journals Improving entrepreneurial competencies in the classroom: an extension and in-study replication

2020 ◽  
Vol 23 (2) ◽  
pp. 79-96
Author(s):  
Caroline E.W. Glackin ◽  
Steven E. Phelan
Keyword(s):  
Treatment Group ◽  
Experimental Design ◽  
Initial Study ◽  
Matched Pair ◽  
Control Group ◽  
Content Type ◽  
Quasi Experimental ◽  
Entrepreneurial Competencies ◽  
One Year ◽  
Self Replication

PurposeA recent paper by Morris et al. (2013b) presented evidence that students can develop entrepreneurial competencies through international fieldwork. This paper explores whether the same results can be developed in a traditional classroom setting.Design/methodology/approachThe study is a systematic replication of the Morris study with the addition of a matched pair, quasi-experimental design, with a self-replication. Data were collected on 13 self-reported competencies at the start of a semester from two groups using the Morris instrument. The treatment group was exposed to a curriculum designed to teach entrepreneurial competencies, and both groups were re-surveyed at the end of the semester. The process was then repeated with a different cohort, one year later, to replicate the initial study.FindingsFive competencies saw significant increases in the first treatment group. However, only three of these competencies increased more in the treatment group than the control group. In the replication study, only one competency was significantly higher in the treatment group, and that competency was not one of the original three.Practical implicationsEducators and policymakers should select a curriculum that is valid and reliable. Entrepreneurship educators and policymaker should devote more time to evaluating the effectiveness of different pedagogical techniques for improving entrepreneurial competencies.Originality/valueTo the best of our knowledge, this is one of the first studies in entrepreneurship education to undertake a matched pair, quasi-experimental design with an in-study replication. The results indicate that serious inferential errors arise if simpler designs are used, even though such designs are the norm in entrepreneurship research.

Psychological mechanisms linking ethical climate to employee whistle-blowing intention

2018 ◽  
Vol 33 (2) ◽  
pp. 196-213 ◽  
Author(s):  
Lulu Zhou ◽  
Yan Liu ◽  
Zhihong Chen ◽  
Shuming Zhao
Keyword(s):  
Risk Aversion ◽  
Organizational Identification ◽  
Ethical Climate ◽  
Moral Identity ◽  
Individual Risk ◽  
Hierarchical Regression ◽  
Content Type ◽  
Whistle Blowing ◽  
Moderating Role

Purpose The purpose of this paper is to explore how a perceived ethical climate influences employees’ intention to whistle-blow through internal organizational channels and incorporates the mediating role of organizational identification and moral identity as well as the moderating role of individual risk aversion. Design/methodology/approach The five proposed hypotheses were tested using hierarchical regression analysis with two waves of data collected in 2016 from 667 employees in Chinese organizations. Findings The findings indicate that perceived ethical climate had a positive effect on employees’ internal whistle-blowing intention, which was mediated by organizational identification and moral identity. Furthermore, employees’ risk aversion weakened the effect of organizational identification, while the moderating role by moral identity on internal whistle-blowing intention was not validated. Originality/value This study explains the psychological mechanism of whistle-blowing intention from the perspective of social identity, which contributes to opening the “black box” of the transmitting processes from the perceived ethical climate to whistle-blowing intention. This study also extends the literature by defining a boundary condition of risk aversion that hinders organizational identification influence on employee whistle-blowing intention.

The effect of fetal hypothalamus grafts on weight gain resulting from lesions of the ventromedial hypothalamus

1988 ◽  
Vol 68 (1) ◽  
pp. 112-116 ◽  
Author(s):  
Robert K. Erickson ◽  
Frederick D. Brown ◽  
Keith L. Schaible ◽  
Robert L. Wollmann
Keyword(s):  
Weight Gain ◽  
Treatment Group ◽  
Third Ventricle ◽  
Fetal Brain ◽  
Ventromedial Hypothalamus ◽  
Daily Weight Gain ◽  
Control Group ◽  
Adult Rats ◽  
Rapid Weight Gain ◽  
Content Type

✓ Bilateral ventromedial hypothalamic lesions in female adult rats which resulted in hyperphagia and rapid weight gain were followed by placement of fetal brain tissue in the anterior third ventricle. The treatment group received fetal hypothalamus grafts, and fetal cortical tissue of identical age was grafted into the control group. A significant reduction in average daily weight gain was noted from 4 to 12 weeks following transplantation in the treatment group. At 12 weeks posttransplantation, the animals were sacrificed for histological analysis. Examination of the hypothalamus grafts revealed neurons, ependymal clusters, and axonal processes which appeared to infiltrate the surrounding hypothalamic parenchyma.

scholarly journals The impact of government support programs for the development of businesses in Chile

2015 ◽  
Vol 53 (8) ◽  
pp. 1736-1754 ◽  
Author(s):  
Christian A. Cancino ◽  
Claudio A. Bonilla ◽  
Marcos Vergara
Keyword(s):  
Treatment Group ◽  
Small Businesses ◽  
Statistical Significance ◽  
Government Support ◽  
Control Group ◽  
Public Programs ◽  
Content Type ◽  
The One ◽  
The Impact ◽  
Practical Implications

Purpose – The purpose of this paper is to analyze the impact on businesses in Chile of the Seed Capital Program (SCP) implemented by Chile’s Technical Cooperation Services. Design/methodology/approach – In order to analyze the impact of this SCP, a counter-factual scenario was used that entailed a combination of the propensity score matching with difference in difference methods. A total of 682 businesses were surveyed (378 in the treatment group and the rest in the control group), 164 of which gave complete responses to the surveys, 89 belonging to the treatment group and 75 to the control group. Findings – The results are mixed. On the one hand, the impact of sales is positive but its statistical significance depends on the model used. With regard to the number of employees, however, the results are positive and statistically significant regardless of the model used. The results also show that participating in the program has no incidence on the probability of later obtaining financing. Research limitations/implications – This study highlights the importance of differentiating between opportunity-driven entrepreneurship programs and necessity-driven entrepreneurship programs. Practical implications – It also suggests improvements in public policy to develop entrepreneurship in small businesses in Chile. These suggestions may also be interesting for other countries facing similar challenges in terms of developing private entrepreneurship as a vehicle to generate economic development. Originality/value – This exploratory work may be interesting to those in charge of designing, implementing and evaluating public programs in support of small- and mid-sized enterprise development.

Normobaric hyperoxia—induced improvement in cerebral metabolism and reduction in intracranial pressure in patients with severe head injury: a prospective historical cohort—matched study

2004 ◽  
Vol 101 (3) ◽  
pp. 435-444 ◽  
Author(s):  
Christos M. Tolias ◽  
Michael Reinert ◽  
Rolf Seiler ◽  
Charlotte Gilman ◽  
Alexander Scharf ◽  
...  
Keyword(s):  
Treatment Group ◽  
Intracranial Pressure ◽  
Historical Control Group ◽  
Historical Control ◽  
Control Group ◽  
Historical Cohort ◽  
Normobaric Hyperoxia ◽  
Content Type ◽  
Severe Tbi ◽  
Fine Print

Object. The effect of normobaric hyperoxia (fraction of inspired O2 [FIO2] concentration 100%) in the treatment of patients with traumatic brain injury (TBI) remains controversial. The aim of this study was to investigate the effects of normobaric hyperoxia on five cerebral metabolic indices, which have putative prognostic significance following TBI in humans. Methods. At two independent neurointensive care units, the authors performed a prospective study of 52 patients with severe TBI who were treated for 24 hours with 100% FIO2, starting within 6 hours of admission. Data for these patients were compared with data for a cohort of 112 patients who were treated in the past; patients in the historical control group matched the patients in our study according to their Glasgow Coma Scale scores after resuscitation and their intracranial pressure within the first 8 hours after admission. Patients were monitored with the aid of intracerebral microdialysis and tissue O2 probes. Normobaric hyperoxia treatment resulted in a significant improvement in biochemical markers in the brain compared with the baseline measures for patients treated in our study (patients acting as their own controls) and also compared with findings from the historical control group. In the dialysate the glucose levels increased (369.02 ± 20.1 µmol/L in the control group and 466.9 ± 20.39 µmol/L in the 100% O2 group, p = 0.001), whereas the glutamate and lactate levels significantly decreased (p < 0.005). There were also reductions in the lactate/glucose and lactate/pyruvate ratios. Intracranial pressure in the treatment group was reduced significantly both during and after hyperoxia treatment compared with the control groups (15.03 ± 0.8 mm Hg in the control group and 12.13 ± 0.75 mm Hg in the 100% O2 group, p < 0.005) with no changes in cerebral perfusion pressure. Outcomes of the patients in the treatment group improved. Conclusions. The results of the study support the hypothesis that normobaric hyperoxia in patients with severe TBI improves the indices of brain oxidative metabolism. Based on these data further mechanistic studies and a prospective randomized controlled trial are warranted.

Reversal of cerebral vasospasm using an intrathecally administered nitric oxide donor

1998 ◽  
Vol 89 (2) ◽  
pp. 279-288 ◽  
Author(s):  
Erich W. Wolf ◽  
Amit Banerjee ◽  
Jill Soble-Smith ◽  
F. Curtis Dohan ◽  
Richard P. White ◽  
...  
Keyword(s):  
Treatment Group ◽  
Cerebral Vasospasm ◽  
Low Dose ◽  
Control Group ◽  
Treatment Control ◽  
No Donor ◽  
Content Type ◽  
Dose Treatment ◽  
Treatment Control Group ◽  
Fine Print

Object. Intrathecal bolus administration of (Z)-1-[N-(2-aminoethyl)-N-(2-ammonioethyl)aminio]diazen-1-ium-1,2-diolate (DETA/NO), a long half-life diazeniumdiolate-class nitric oxide (NO) donor, was evaluated for safety and efficacy in the treatment of delayed cerebral vasospasm in a canine model of subarachnoid hemorrhage (SAH). Methods. The baseline basilar artery (BA) diameter of 25 dogs was measured with the aid of angiography on Day 0. Vasospasm was then induced by intracisternal injection of autologous arterial blood on Days 0 and 2. Repeated arteriography on Day 7 revealed an average BA diameter of 58% of baseline. Each dog was then randomized to one of four groups: a pathology control group (SAH only, four animals); a treatment control group (SAH plus 2 µmol of the inactive drug carrier DETA, eight animals); a low-dose treatment group (SAH plus 0.2 µmol DETA/NO, six animals); or a high-dose treatment group (SAH plus 2 µmol DETA/NO, six animals). The drugs were administered in a 2-ml intrathecal bolus via the cisterna magna. Arterial caliber was monitored by angiography over the subsequent 4 hours. A 2-µmol dose of the drug was then given and serial arteriography continued for an additional hour to screen for tachyphylaxis. Intracranial pressure and respiratory and hemodynamic parameters were continuously monitored. Histopathological analyses of the animals' brains were performed after the dogs were killed on Day 8. The drug DETA/NO produced reversal of vasospasm in a dose-dependent fashion that roughly followed a double exponential time course. Doses of 2 µmol DETA/NO resulted in restoration of the angiographically monitored BA diameter to the prevasospasm size at 1.5 hours posttreatment, and this was sustained at 88% of baseline at 4 hours (p < 0.01, independent samples t-test). By contrast, the treatment control group remained on average at 54% of baseline diameter. The low-dose treatment group achieved only partial and more transitory relaxation. Histopathological analyses showed findings consistent with chronic SAH but did not demonstrate any toxicity associated with the NO donor. No adverse physiological changes were seen. Conclusions. This study indicates that long-acting NO donors are potentially useful as agents to restore circulation in patients suffering from cerebral vasospasm.

Fretting about Modest Risks Is a Mistake

2019 ◽  
Vol 61 (3) ◽  
pp. 34-48
Author(s):  
Matthew Rabin ◽  
Max Bazerman
Keyword(s):  
Risk Aversion ◽  
Risk Preferences ◽  
Risk Averse

Managers often engage in risk-averse behavior, and economists, decision analysts, and managers treat risk aversion as a preference. In many cases, acting in a risk-averse manner is a mistake, but managers can correct this mistake with greater reflection. This article provides guidance on how individuals and organizations can move toward greater reflection and a more profitable aggregate portfolio of decisions. Inconsistency in risk preferences across decisions is a costly mistake for both individuals and for organizations.

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