Incentive Effects of Funding Contracts : An Experiment

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REISS, J. Philipp, Irenaeus WOLFF, 2011. Incentive Effects of Funding Contracts : An Experiment

@techreport{Reiss2011Incen-17672, series={Research paper series / Thurgauer Wirtschaftsinstitut}, title={Incentive Effects of Funding Contracts : An Experiment}, year={2011}, number={70}, author={Reiss, J. Philipp and Wolff, Irenaeus} }

Wolff, Irenaeus Incentive Effects of Funding Contracts : An Experiment 2012-01-18T07:47:59Z We examine the incentive e ffects of funding contracts on entrepreneurial eff ort decisions and allocative e ciency. We experiment with four types of contracts (standard debt contract, outside equity, non-monotonic contract, full-subsidy contract) that di er in the structure of investor repayment and, therefore, in the incentives for entrepreneurial e ffort provision. Theoretically the replacement of a standard debt contract by a repayment-equivalent non-monotonic contract reduces eff ort distortions and increases e ciency. We test this non-monotonic-contracts hypothesis in the laboratory as well.<br />Our results reveal that the incentive e ffects of funding contracts need to be<br />experienced before they refl ect in observed behavior. With su cient experience<br />observed behavior is consistent with the theoretical predictions and supports the non-monotonic-contracts hypothesis: we fi nd that the replacement of a standard debt contract by a repayment-neutral non-monotonic contract increases entrepreneurial income by 170% and total surplus by 30% in our setting. deposit-license eng 2011 2012-01-18T07:47:59Z Reiss, J. Philipp Wolff, Irenaeus Reiss, J. Philipp

Dateiabrufe seit 01.10.2014 (Informationen über die Zugriffsstatistik)

TWI-RPS-070-Reiss-Wolff-2011-10.pdf 170

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