The neural correlates of contractual risk and penalty framingW. Ekins (), Andrew Brooks () and Gregory Berns () Journal of Risk and Uncertainty, 2014, vol. 49, issue 2, 125-140 Abstract: Standard economic theory treats contractual risk the same as risk experienced in a lottery, but the transfer of risk from principal to agent may change the perception of risk. Previous experimental studies have shown that positive and negative framing affects both gambles and incentive contracts. An agent’s perception of bonus and penalty framing in a contract can determine the extent to which lottery risk and contractual risk are similar. We designed an experiment that tested the effect of bonus and penalty framed contracts on behavior under an implicit chance of failure. Moreover, we used functional magnetic resonance imaging (fMRI) to observe brain activity while participants viewed the contracts and purchased precautionary measures. We found that the dorsal striatum was more active during a penalty frame than a bonus frame. The study suggests that risk experienced by agents in an incentive contract is not comparable to risk experienced as a lottery. Copyright Springer Science+Business Media New York 2014 Keywords: Risk; Incentive contracts; Framing effects; fMRI; Striatum; C91; D81; D86; D87 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:kap:jrisku:v:49:y:2014:i:2:p:125-140 Ordering information: This journal article can be ordered from DOI: 10.1007/s11166-014-9199-7 Access Statistics for this article Journal of Risk and Uncertainty is currently edited by W. Kip Viscusi More articles in Journal of Risk and Uncertainty from Springer |
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