Empirical studies of the principal-agent relationship find that extrinsic incentives work in many instances, linking rewards to performance increases effort, but that they can also backfire, reducing effort. Intrinsic motivation, the internal drive to work to master a skill or to improve one's...

The application of the classical "linear" model of incentive pay to the case when the noise is multiplicative to effort generates two predictions for a given strength of incentives: 1) more risk-averse workers will put in less effort, and 2) setting a performance target will weaken the negative...

The, often observed, positive correlation between incentive intensity and risk has been explained in two ways: the presence of transaction costs as determinants of contracts and the sorting of risk-tolerant individuals into firms using high-intensity incentive contracts. The empirical importance...

The French "2010 Household Wealth Survey" includes an experimental module that makes it possible to measure risk aversion in an objective manner. Using this survey, we analyse workers’ attitudes towards financial participation with respect to their attitudes towards risk.

I investigate how different legal regimes affect auditor's effort and investors' investment decisions when the auditor is subject to probability weighting and loss aversion, which are two important characteristics of Prospect Theory. Probability weighting encourages an auditor to overrate the...