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Peer pressure and productivity: The role of observing and being observed

Sotiris Georganas, Mirco Tonin and Michael Vlassopoulos ()

Journal of Economic Behavior & Organization, 2015, vol. 117, issue C, 223-232

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. To assess the importance of payoff externalities in the emergence of peer effects, 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.

Keywords: Peer effects; Piece rate; Team incentives; Real-effort experiment (search for similar items in EconPapers)
JEL-codes: D03 J24 M52 M59 (search for similar items in EconPapers)
Date: 2015
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Working Paper: Peer Pressure and Productivity: The Role of Observing and Being Observed (2014) Downloads
Working Paper: Peer Pressure and Productivity: The Role of Observing and Being Observed (2013) Downloads
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Handle: RePEc:eee:jeborg:v:117:y:2015:i:c:p:223-232