Review of Behavioral Economics > Vol 2 > Issue 4

Peer Pressure and Moral Hazard in Teams: Experimental Evidence

Brice Corgnet, 1Argyros School of Business and Economics and Economic Science Institute, Chapman University, USA, corgnet@chapman.edu Roberto Hernán-González, Nottingham University, UK, Stephen Rassenti, Economic Science Institute, Chapman University, USA,
 
Suggested Citation
Brice Corgnet, Roberto Hernán-González and Stephen Rassenti (2015), "Peer Pressure and Moral Hazard in Teams: Experimental Evidence", Review of Behavioral Economics: Vol. 2: No. 4, pp 379-403. http://dx.doi.org/10.1561/105.00000040

Published: 30 Dec 2015
© 2015 B. Corgnet, R. Hernán-González, and S. Rassent
 
Subjects
Labor Economics,  Public Economics: Public Goods,  Collective action
 
Keywords
C92D23M52
IncentivesFree-ridingPeer pressureOrganization theory
 

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In this article:
1. Introduction
2. Experimental Design and Hypotheses
3. Results
4. Conclusions
References

Abstract

Team incentives have been found to be particularly effective both in the lab and in the field despite the moral hazard in teams problem identified by Holmström (1982). In a newly developed virtual workplace, we show that, in line with Holmström, moral hazard in teams is indeed pervasive. Subsequently, we find strong evidence for the conjecture of Kandel and Lazear (1992) that peer pressure may resolve the moral hazard in teams problem. Organizations equipped with a very weak form of peer monitoring (anonymous and without physical proximity, verbal threats or face-to-face interactions) perform as well as those using individual incentives.

DOI:10.1561/105.00000040

Online Appendix | 105.00000040_app.pdf

This is the article's accompanying appendix.

DOI: 10.1561/105.00000040_app