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Incentive schemes and peer effects on risk behaviour: an experiment

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  • Francesca Gioia

    (University of Edinburgh)

Abstract

This paper studies whether incentivizing performance with competition and cooperation-based incentive schemes, rather than individual compensation, affects peer effects on subsequent risk behaviour. We run a laboratory experiment in which we introduce three different compensation schemes—piece rate, the equal-split-sharing-rule and a tournament—associated with a real effort task and we measure risk behaviour both before and after the effort task. We find that competition more than halves peer influence on risk behaviour compared with piece-rate compensation and in some specifications produces negative peer effects. Competition also significantly reduces an individual’s feeling of attachment to their peers and self-reported peer influence.

Suggested Citation

  • Francesca Gioia, 2019. "Incentive schemes and peer effects on risk behaviour: an experiment," Theory and Decision, Springer, vol. 87(4), pages 473-495, November.
    • Handle: RePEc:kap:theord:v:87:y:2019:i:4:d:10.1007_s11238-019-09717-4
    DOI: 10.1007/s11238-019-09717-4
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