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Peer Pressure and Productivity: The Role of Observing and Being Observed

Author

Listed:
  • Georganas, Sotiris

    (Royal Holloway, University of London)

  • Tonin, Mirco

    (Free University of Bozen/Bolzano)

  • Vlassopoulos, Michael

    (University of Southampton)

Abstract

Peer effects arise in situations where workers observe each other's work activity. In this paper we disentangle the effect of observing a peer from that of being observed by a peer, by setting up a real effort experiment in which we manipulate the observability of performance. In particular, we randomize subjects into three groups: in the first one subjects are observed by another subject, but do not observe anybody; in the second one subjects observe somebody else's performance, but are not observed by anybody; in the last group subjects work in isolation, neither observing, nor being observed. We consider both a piece rate compensation scheme, where pay depends solely on own performance, and a team compensation scheme, where pay also depends on the performance of other team members. Overall, we find some evidence that subjects who are observed increase productivity at least initially when compensation is team based, while we find that subjects observing react to what they see in a non-linear but monotonic way when compensation is based only on own performance.

Suggested Citation

  • Georganas, Sotiris & Tonin, Mirco & Vlassopoulos, Michael, 2013. "Peer Pressure and Productivity: The Role of Observing and Being Observed," IZA Discussion Papers 7523, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7523
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    References listed on IDEAS

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    More about this item

    Keywords

    team incentives; piece rate; peer effects; real-effort experiment;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M59 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Other

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