Experiment finds bonus caps can reduce risk-taking
BoE paper says bonus caps can work, in contrast to earlier work
Research published by the Bank of England finds bonus caps may be effective in reducing risk-taking, a finding that contrasts with the central bank’s earlier hostility to the policy.
Qun Harris, Misa Tanaka and Emma Soane conducted a “lab experiment” with 253 participants to test how different aspects of the bonus cap and “malus” regime work. Malus involves lowering a deferred bonus payment if certain conditions materialise.
The authors find that bonus caps can reduce risk-taking, though they
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