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Peer Pressure and Incentives

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  • Kohei Daido

Abstract

We study the effects of peer pressure on incentives. To this end, we extend a multiagent model with moral hazard and limited liability by introducing a peer pressure function. We show that the optimal incentive for the less productive agent is more high powered than that for the more productive agent in the case with peer pressure. Moreover, in comparison with the case without peer pressure, the optimal incentive for the less productive agent becomes more high powered, while the optimal incentive for the more productive agent becomes less high powered. Copyright Blackwell Publishers Ltd and the Board of Trustees of the Bulletin of Economic Research, 2006.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Bulletin of Economic Research.

Volume (Year): 58 (2006)
Issue (Month): 1 (01)
Pages: 51-60

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Handle: RePEc:bla:buecrs:v:58:y:2006:i:1:p:51-60

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Cited by:
  1. Kohei Daido, 2006. "Incentive Effects of Peer Pressure in Organizations," Economics Bulletin, AccessEcon, vol. 10(14), pages 1-10.
  2. repec:ebl:ecbull:v:10:y:2006:i:14:p:1-10 is not listed on IDEAS
  3. Kohei Daido, 2009. "Incentives, Identity, and Organizational Forms," Discussion Paper Series, School of Economics, Kwansei Gakuin University 47, School of Economics, Kwansei Gakuin University, revised Jul 2009.

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