Template-Type: ReDIF-Paper 1.0
Title: Peer Effects and Incentives
Author-Name: Matthias Kräkel
Author-Email: m.kraekel@uni-bonn.de
Classification-JEL: C72, D03, D86
Keywords: externalities, moral hazard, other-regarding preferences 

Abstract:  In a multi-agent setting, individuals often compare own 
performance with that of their peers. These comparisons influence agents'
incentives and lead to a noncooperative game, even if the agents have 
to complete independent tasks. I show that depending on the interplay 
of the peer effects, agents' efforts are either strategic complements or 
strategic substitutes. I solve for the optimal monetary incentives that 
complement the peer effects and show that the principal prefers sequential 
effort choices of the agents to choosing efforts simultaneously.

Note: 
Length: 23
Creation-Date: 2014-10
Revision-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse03_2014.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse03_2014