This study examines the effect of agents' overconfident expectations in their production on their contract breach. Drawing on a reference-dependent framework, we theoretically deduce propositions for compliance to agreements where an agent exhibits overconfidence and loss aversion. We further conduct lab experiments with a multiple-stage design and find that overconfident agents are more likely to breach the contract than non-overconfident (unbiased and underconfident) agents. Moreover, overconfident agents breach more often and to a greater extent with increasing loss aversion. We also test the impact of a non-deterministic environment ("shock condition'") where failure to correctly estimate expected payoffs can be hidden compared to a deterministic environment ("no-shock condition"). Our findings indicate that agents are more likely to breach in the shock condition but the shock does not affect the extent of breach.  Most of our results are in line with the framework. In a treatment, we manipulate agents' overconfidence exogenously and use it as an instrument to establish causality.

Competitive bonuses are commonly used to promote higher productivity in the workplace. Yet, these types of incentives can have subsequent negative spillovers on coworkers’ prosocial behavior. We revisit this question in a lab-in-the-field experiment and examine whether competition negatively affects Social Value Orientation (prosocial attitudes) in addition to contributions to a public good (cooperative behavior). By considering the context of a developing country, we contribute to replicating previous findings in White, Educated, Industrialized, Rich, and Democratic (WEIRD) samples. We find that when the payment dispersion between winners and losers is high, competition reduces both cooperation and prosocial attitudes compared to a threshold payment. Mainly winners cooperate less under competition. A comparison with a random payment scheme suggests that rivalry might partly explain the crowding-out effect in other-regarding preferences. Under low payment dispersion, competition does not affect cooperation or prosocial attitudes.

In this paper, we investigate how payment procedures that are deemed unfair can spur unethical behavior towards innocent coworkers in a real-effort experiment. In our Discrimination treatment, a highly unfair payment procedure with wage differentials, half the workforce is randomly selected and paid by relative performance whereas the remaining receives no payment. A joy-of-destruction game measures unethical behavior subsequently. Non-earners in Discrimination destroy significantly more than in the non-discriminatory control treatments. In Discrimination, unethical behavior is generally high for all non-earners, independent of individual inequality aversion and relative performance beliefs. In the control treatments, inequality aversion is the main driver of destructive behavior.