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Title:Transparency, inequity aversion, and the dynamics of peer pressure in teams: theory and evidence PDF Logo
Authors:Mohnen, Alwine
Pokorny, Kathrin
Sliwka, Dirk
Issue Date:2008
Series/Report no.:IZA Discussion Papers 3281
Abstract:We provide an explanation for peer pressure in teams based on inequity 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 if 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.
Subjects:Team
transparency
peer pressure
free-riding
incentives
inequity aversion
real effort
experiment
JEL:D23
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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