Hah! Mercians are hard, you know

I wonder whether the effect might not be the other way round? If they see their fellows being executed they may fight all the harder to avoid their own capture and avenge the barbarous deaths of their compatriots?

Not strictly analogous, but think of Sun Tzu's concept of "death ground" - you are giving the enemy only two options - win or die.

It's also possible your own troops might be the ones demoralised - they now know what a mean their general is, it looks a bit like you might be losing control of the battle, and they lose their share of the ransom....