Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/89631 
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper No. 4572
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Peer effects arise in situations where workers observe each others’ work activity. In this paper we disentangle the effect of observing a peer from that of being observed by a peer, by setting up a real effort experiment in which we manipulate the observability of performance. In particular, we randomize subjects into three groups: in the first one subjects are observed by another subject, but do not observe anybody; in the second one subjects observe somebody else’s performance, but are not observed by anybody; in the last group subjects work in isolation, neither observing, nor being observed. We consider both a piece rate compensation scheme, where pay depends solely on own performance, and a team compensation scheme, where pay also depends on the performance of other team members. Overall, we find some evidence that subjects who are observed increase productivity at least initially when compensation is team based, while we find that subjects observing react to what they see when compensation is based only on own performance.
Subjects: 
peer effects
piece rate
team incentives
real-effort experiment
JEL: 
D03
J24
M52
M59
Document Type: 
Working Paper
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