We modify a canonical participation game used to study International Environmental Agreements (IEA), considering both mixed and pure strategies at the participation stage, and including a prior cost-reducing investment stage. The use of mixed strategies at the participation stage reverses a familiar result and also reverses the policy implication of that result: with mixed strategies, equilibrium participation and welfare is higher in equilibria that involve higher investment.

Exploiting findings that losses loom larger than gains, studies have shown that framing manipulations can increase productivity of workers. Using a natural field experiment that exogenously manipulates wage bonuses within contests in a Chinese high-tech manufacturing facility, we show that how loss aversion affects worker behavior critically depends on the incentive scheme as well as the framing manipulation. Four sets of two identical teams competed against each other to win a bonus given to the team, within a set, with the higher average hourly productivity over the week. In each set, the bonus was framed as a reward or gain for one team and as a punishment or loss for the other. Average weekly productivity was slightly higher under the loss treatment, but this increase was statistically insignificant. However, the team under the loss treatment was at least 35% more likely to win the contest. As teams' payoffs are based on relative productivity under a contest, framing effect is much stronger in terms of relative productivity. Finally, workers seemingly responded to the bonus by increasing the quality of production as well as quantity-defect rate fell as productivity increased.

A well-recognized problem in the multitasking literature is that workers might substantially reduce their effort on tasks that produce unobservable outputs as they seek the salient rewards to observable outputs. Since the theory related to multitasking is decades ahead of the empirical evidence, the economic costs of standard incentive schemes under multitasking contexts remain largely unknown. This study provides empirical insights quantifying such effects using a field experiment in Chinese factories. Using more than 2200 data points across 126 workers, we find sharp evidence that workers do trade off the incented output (quantity) at the expense of the non-incented one (quality) as a result of a piece rate bonus scheme. Consistent with our theoretical model, treatment effects are much stronger for workers whose base salary structure is a flat wage compared to those under a piece rate base salary. While the incentives result in a large increase in quantity and a sharp decrease in quality for workers under a flat base salary, they result only in a small increase in quantity without affecting quality for workers under a piece rate base salary.

We examine whether exposure to a more or less risky environment affects people's subsequent risk-taking behavior. In a laboratory setting, all subjects went through twelve rounds of multiple-price-list decisions between a risky alternative and a safe alternative. In the first six rounds, subjects were randomly assigned to a high-, moderate-, or low-risk environment, which differed in the variances of the lotteries they were exposed to. In the last six rounds, subjects in all treatments made decisions on an identical set of lotteries. We found that subjects who had experienced a riskier environment exhibited a higher degree of risk aversion. Our experimental design allows us to conclude that this effect is driven by the risk environment per se, rather than the realized outcomes of the risk. This finding has important theoretical and policy implications.

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