Transparency, Inequity Aversion, and the Dynamics of Peer Pressure in Teams: Theory and Evidence

39 Pages Posted: 23 May 2008

See all articles by Alwine Mohnen

Alwine Mohnen

TUM School of Management; IZA Institute of Labor Economics

Kathrin Manthei

University of Cologne

Dirk Sliwka

University of Cologne - Faculty of Management, Economics and Social Sciences; IZA Institute of Labor Economics

Abstract

We provide an explanation for peer pressure in teams based on inequity aversion. Analyzing a two-period model with two agents, we find that the effect of inequity aversion strongly depends on the information structure. When contributions are unobservable, agents act as if they were purely selfish. However, when contributions are made transparent at an interim stage, agents exert higher efforts in the first period and adjust their efforts according to the interim information in the second period. This form of peer pressure reduces free-riding and thus, more efficient outcomes are attained. The results are confirmed in a real effort experiment.

Keywords: inequity aversion, incentives, free-riding, peer pressure, transparency, team, real effort, experiment

JEL Classification: D23, M12

Suggested Citation

Mohnen, Alwine and Manthei, Kathrin and Sliwka, Dirk, Transparency, Inequity Aversion, and the Dynamics of Peer Pressure in Teams: Theory and Evidence. , Vol. , pp. -, . Available at SSRN: https://ssrn.com/abstract=1136443 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Alwine Mohnen (Contact Author)

TUM School of Management ( email )

Arcisstrasse 21
Munich, 80333
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Kathrin Manthei

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Dirk Sliwka

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Richard-Strauss-Str. 2
Cologne, D-50923
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
129
Abstract Views
800
rank
224,148
PlumX Metrics