Transparency, Inequity Aversion, and the Dynamics of Peer Pressure in Teams: Theory and Evidence

Alwine Mohnen (), Kathrin Pokorny () and Dirk Sliwka
Additional contact information
Alwine Mohnen: Munich University of Technology
Kathrin Pokorny: University of Cologne

No 3281, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: real effort; team; transparency; peer pressure; free-riding; incentives; inequity aversion; experiment (search for similar items in EconPapers)
JEL-codes: D23 M12 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2008-01
New Economics Papers: this item is included in nep-exp and nep-lab
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Citations: View citations in EconPapers (95)

Published - published in: Journal of Labor Economics, 26 (4), 2008, 693 - 720

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Journal Article: Transparency, Inequity Aversion, and the Dynamics of Peer Pressure in Teams: Theory and Evidence (2008)
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