Home >> FinanzArchiv: Public Finance Analysis, Volume 62, Number 1

When Should the Talented Receive Weaker Incentives? Peer Pressure in Teams

Authors: Hehenkamp, Burkhard; Kaarboe, Oddvar

Source: FinanzArchiv: Public Finance Analysis, Volume 62, Number 1, March 2006 , pp. 124-148(25)

Publisher: Mohr Siebeck

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Abstract:

We study optimal incentive contracts offered to teams where team members feel a social pressure to exert similar effort levels. The team consists of two groups of agents differing in their productivity. We characterize first best and the equilibrium under agency. Regarding economic incentives, the principal has to adjust the incentives away from the first-best incentives that would arise in the absence of peer pressure. In equilibrium less productive agents exert less effort and all agents experience peer pressure.

Keywords: TEAMS; INCENTIVES; HETEROGENEITY; PEER PRESSURE

Document Type: Research article

DOI: http://dx.doi.org/10.1628/001522106776667040

Publication date: 2006-03-01

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  • FinanzArchiv founded in 1884 is one of the world's oldest professional journals in public finance.

    FinanzArchiv publishes original work from all fields of public economics which are of interest to an international readership, e.g. taxation, public debt, public goods, public choice, federalism, market failure, social policy, and the welfare state. Special emphasis is on high-quality theoretical and empirical papers on current policy issues.

    FinanzArchiv is a well-established, internationally oriented journal in the field of public economics, widely read in Europe and all over the world.

    FinanzArchiv is listed in the Social Science Citation Index (SSCI, JCR impact factor 2007 0,296), in Current Contents/Social and Behavioral Sciences, in IDEAS and RePEc (IDEAS/RePEc simple impact factor 2008 1.177), in the Journal of Economic Literature (CD and online), and in the International Bibliography of the Social Sciences.

    FinanzArchiv is a fully peer-reviewed journal committed to a prompt turnaround of submissions. No more than four months should pass between online submission of a manuscript and the editor's decision on acceptance, revision, or rejection.
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