Choking under time pressure: The influence of deadline-dependent bonus and malus incentive schemes on performance

•We examine the effect of individual loss aversion on performance under time pressure.•In a laboratory experiment, participants had to work on a real effort task.•We used deadline-dependent contracts, framed in bonus and malus terms.•When working under a malus contract loss averse individuals performed worse.•These individuals needed more time to reply and were less able to avoid maluses.

Many economically relevant activities are executed under notable time pressures. Incentivized deadlines are often the reason people feel pressured. In such an environment, individual preferences can predict performance. Through a laboratory experiment, we examine the predictive power of individual loss aversion on performance under deadline-dependent incentives. Participants worked on a real effort task under two payoff-equivalent contracts framed in bonus and malus terms. The results show lower performance for individuals with high loss aversion when working under a malus contract. These individuals needed more time to reply and were less able to avoid maluses than other individuals. Choking can explain this observed behavior.