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Reward the lucky? An experimental investigation of the impact of agency and luck on bonuses

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  • de Oliveira, Angela C.M.
  • Smith, Alexander
  • Spraggon, John

Abstract

We examine the impact of agency and luck on bonuses in a two player, two stage controlled laboratory experiment. In the first stage, Player A makes an investment decision on behalf of Player B. In the second stage, Player B makes a dictator allocation for each possible outcome from the investment. We compare dictator giving (bonuses) across outcomes and with a control treatment in which the stage 1 outcomes are determined randomly. We do not find that luck is rewarded with higher bonuses. However, we do find a general tendency to respond to agency with reduced bonuses and, in particular, a significant tendency to reduce bonuses to agents who are unlucky. Additionally, we find that those who are more risk tolerant are less likely to give no bonus under agency but not in the control.

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  • de Oliveira, Angela C.M. & Smith, Alexander & Spraggon, John, 2017. "Reward the lucky? An experimental investigation of the impact of agency and luck on bonuses," Journal of Economic Psychology, Elsevier, vol. 62(C), pages 87-97.
    • Handle: RePEc:eee:joepsy:v:62:y:2017:i:c:p:87-97
    DOI: 10.1016/j.joep.2017.06.008
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    4. Dannenberg, Astrid & Diekert, Florian & Händel, Philipp, 2022. "The effects of social information and luck on risk behavior of small-scale fishers at Lake Victoria," Journal of Economic Psychology, Elsevier, vol. 90(C).
    5. Nina Weber, 2023. "Prosocial Risk-Taking: Growing the Pie or Increasing your Slice?," ifo Working Paper Series 399, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
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    More about this item

    Keywords

    Agency; Luck; Rewards and bonuses;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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