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

23 Pages Posted: 23 Aug 2013

See all articles by Sotiris Georganas

Sotiris Georganas

University of London - Royal Holloway College

Mirco Tonin

Free University of Bozen-Bolzano; IZA; CESifo (Center for Economic Studies and Ifo Institute)

Michael Vlassopoulos

University of Southampton; IZA -- Institute for the Study of Labor

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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.

Keywords: peer effects, piece rate, team incentives, real-effort experiment

JEL Classification: D03, J24, M52, M59

Suggested Citation

Georganas, Sotiris and Tonin, Mirco and Vlassopoulos, Michael, Peer Pressure and Productivity: The Role of Observing and Being Observed. IZA Discussion Paper No. 7523, Available at SSRN: https://ssrn.com/abstract=2314818

Sotiris Georganas (Contact Author)

University of London - Royal Holloway College ( email )

Senate House
Malet Street
London, TW20 0EX
United Kingdom

Mirco Tonin

Free University of Bozen-Bolzano ( email )

Sernesiplatz 1
Bozen-Bolzano, BZ 39100
Italy

IZA ( email )

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

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Munich, DE-81679
Germany

Michael Vlassopoulos

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

IZA -- Institute for the Study of Labor ( email )

Bonn

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