I examine whether stochastic contracts benefit the principal in the setting of moral hazard and loss aversion. Incorporating that the agent is expectation-based loss averse and allowing the principal to add noise to performance signals, I find that stochastic contracts reduce the principal's...

In this paper we study the effects that loss contracts - prepayments that can be clawbacked later - have on group coordination when there is strategic uncertainty. We compare the choices made by experimental subjects in a minimum effort game. In control sessions, incentives are formulated as a...