Abstract
This paper reports the results of a lab experiment designed to study the role of observability for peer effects in the setting of a simple production task. In our experiment, participants in the role of workers engage in a team real-effort task. We vary whether they can observe, or be observed by, one of their co-workers. In contrast to earlier findings from the field, we find no evidence that low-productivity workers perform better when they are observed by high-productivity co-workers. Instead, our results imply that peer effects in our experiment are heterogeneous, with some workers reciprocating a high-productivity co-worker but others taking the opportunity to free ride.
Highlights
This paper uses a lab experiment to improve our understanding of the nature of peer effects in the setting of a simple team production task
We turn to the main results of the paper, where we first estimate the linear-in-means model to examine the presence of peer effects and investigate whether peer effects differ by observability and workers’ ability
We use an alternative estimation technique that allows us to provide an estimate of overall peer effects even when the strength and direction of peer effects vary across workers
Summary
This paper uses a lab experiment to improve our understanding of the nature of peer effects in the setting of a simple team production task. Our experiment aims to shed light on the importance of observability. Do workers increase their effort when matched with a more productive co-worker? Are these peer effects similar for low-ability and high-ability workers?. Peer effects in team production can either be positive or negative. Workers can get motivated by high performance of colleagues, but it can demotivate them or lead to free riding. Whether peer effects are positive or negative has consequences for the optimal organization of a workplace. Learning about the mechanisms that drive peer effects is important
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