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Risk-averse agents with peer pressure

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  • Kohei Daido

Abstract

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

    as
    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. Kohei Daido, 2006. "Peer Pressure and Incentives," Bulletin of Economic Research, Wiley Blackwell, vol. 58(1), pages 51-60, January.
    3. 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.
    4. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
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    Cited by:

    1. Ana I. Balsa & Néstor Gandelman & Nicolás González, 2015. "Peer Effects in Risk Aversion," Risk Analysis, John Wiley & Sons, vol. 35(1), pages 27-43, January.
    2. Cato, Susumu & Ebina, Takeshi, 2014. "Inequality aversion in long-term contracts," MPRA Paper 59893, University Library of Munich, Germany.
    3. Radu Ciobanu & Claudia-Elena Țuclea & Luciana-Floriana Holostencu & Diana-Maria Vrânceanu, 2022. "Decision-Making Factors in the Purchase of Ecologic Products," Sustainability, MDPI, vol. 14(15), pages 1-26, August.
    4. Kohei Daido, 2006. "Peer Pressure and Incentives," Bulletin of Economic Research, Wiley Blackwell, vol. 58(1), pages 51-60, January.
    5. Kohei Daido, 2009. "Incentives, Identity, and Organizational Forms," Discussion Paper Series 47, School of Economics, Kwansei Gakuin University, revised Jul 2009.
    6. Stéphane Mahuteau, 2006. "Labor Economics ‐ by P. Cahuc and A. Zylberberg," The Economic Record, The Economic Society of Australia, vol. 82(258), pages 371-372, September.
    7. Kangsik Choi & Jae-Joon Han & Minhwan Lee, 2018. "Peer Pressure with Inequity Aversion," Korean Economic Review, Korean Economic Association, vol. 34, pages 131-155.

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