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Risk-averse agents with peer pressure


  • Kohei Daido


This article studies the effects of peer pressure on the incentives of risk-averse agents. It defines the peer pressure function and then assumes that each agent feels peer pressure not only when his effort level is below the standard level, but also when it is above that level. It also supposes that agents are heterogeneous in terms of their productivity and the degree to which they respond to peer pressure. It shows that a principal provides incentives that depend on the effects of peer pressure and risk-sharing.

Suggested Citation

  • Kohei Daido, 2004. "Risk-averse agents with peer pressure," Applied Economics Letters, Taylor & Francis Journals, vol. 11(6), pages 383-386.
  • Handle: RePEc:taf:apeclt:v:11:y:2004:i:6:p:383-386 DOI: 10.1080/1350485042000228240

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    References listed on IDEAS

    1. Barron, John M & Gjerde, Kathy Paulson, 1997. "Peer Pressure in an Agency Relationship," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 234-254, April.
    2. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-817, August.
    3. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
    4. Fehr, Ernst & Schmidt, Klaus M., 2001. "Theories of Fairness and Reciprocity," Discussion Papers in Economics 14, University of Munich, Department of Economics.
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    Cited by:

    1. Kohei Daido, 2009. "Incentives, Identity, and Organizational Forms," Discussion Paper Series 47, School of Economics, Kwansei Gakuin University, revised Jul 2009.
    2. Néstor Gandelman & Ana Balsa & Nicolás González, 2012. "Peer Effects in Risk Aversion," Development Research Working Paper Series 11/2012, Institute for Advanced Development Studies.
    3. Cato, Susumu & Ebina, Takeshi, 2014. "Inequality aversion in long-term contracts," MPRA Paper 59893, University Library of Munich, Germany.
    4. Ana I. Balsa & Néstor Gandelman & Nicolás Gonzalez, 2012. "Peer Effects in Risk Aversion," Documentos de Trabajo/Working Papers 1205, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..

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