Peer Pressure and Moral Hazard in Teams: Experimental Evidence
AbstractHolmström (1982) established that free riding behaviors are pervasive whenever people are paid according to aggregate measures of output such as team incentives. However, team incentives have been found to be particularly effective both in the lab and in the field. In this paper we show, in line with Holmström (1982), that shirking behaviors in teams are indeed pervasive. Production levels were significantly lower under team incentives than under individual incentives while the time dedicated to on-the-job leisure activities (Internet usage) was significantly larger under team incentives than under individual incentives. Subsequently, we find that a very weak form of peer monitoring (anonymous and without physical proximity, verbal threats or face to face interactions) allowed organizations using team incentives to perform as well as those using individual incentives. This provides strong evidence for the conjecture of Kandel and Lazear (1992) that peer pressure may resolve the moral hazard in teams problem.
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Bibliographic InfoPaper provided by Chapman University, Economic Science Institute in its series Working Papers with number 13-01.
Length: 52 pages
Date of creation: 2013
Date of revision:
Incentives; free-riding; monitoring; peer pressure; organization theory;
Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-19 (All new papers)
- NEP-CBE-2013-01-19 (Cognitive & Behavioural Economics)
- NEP-EXP-2013-01-19 (Experimental Economics)
- NEP-HRM-2013-01-19 (Human Capital & Human Resource Management)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Socialism, institutions & human nature
by chris dillow in Stumbling and Mumbling on 2013-01-28 14:39:57
- Georganas, Sotiris & Tonin, Mirco & Vlassopoulos, Michael, 2013. "Peer Pressure and Productivity: The Role of Observing and Being Observed," IZA Discussion Papers 7523, Institute for the Study of Labor (IZA).
- Sotiris Georganas & Mirco Tonin & Michael Vlassopoulos, 2014. "Peer Pressure and Productivity: The Role of Observing and Being Observed," CESifo Working Paper Series 4572, CESifo Group Munich.
- Brice Corgnet & Roberto Hernán-Gonzalez & Stephen Rassenti, 2013. "Firing Threats and Tenure: Incentive effects and impression management," Working Papers 13-15, Chapman University, Economic Science Institute.
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