Peer Pressure and Incentives
AbstractWe 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 InfoArticle provided by Wiley Blackwell in its journal Bulletin of Economic Research.
Volume (Year): 58 (2006)
Issue (Month): 1 (01)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0307-3378
Other versions of this item:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
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- repec:ebl:ecbull:v:10:y:2006:i:14:p:1-10 is not listed on IDEAS
- Kohei Daido, 2006. "Incentive Effects of Peer Pressure in Organizations," Economics Bulletin, AccessEcon, vol. 10(14), pages 1-10.
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