Transparency, inequity aversion, and the dynamics of peer pressure in teams: Theory and evidence

Alwine Mohnen, Kathrin Pokorny, Dirk Sliwka

Research output: Contribution to journalArticlepeer-review

57 Scopus citations

Abstract

We provide an explanation for peer pressure in teams based on in-equity aversion. Analyzing a two-period model with two agents, we find that the effect of inequity aversion strongly depends on the information structure. When contributions are unobservable, agents act as though they were purely selfish. However, when contributions are made transparent at an interim stage, agents exert higher efforts in the first period and adjust their efforts according to the interim information in the second period. This form of peer pressure reduces free riding, and thus more efficient outcomes are attained. The results are confirmed in a real effort experiment.

Original languageEnglish
Pages (from-to)693-720
Number of pages28
JournalJournal of Labor Economics
Volume26
Issue number4
DOIs
StatePublished - Oct 2008
Externally publishedYes

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