We study the effects of peer pressure on the incentives of riskaverse agents. We define the peer pressure function and then assume that each agent feels peer pressure not only when his effort level is below the standard level, but also when it is above that level. We also suppose that agents are...

We analyze the effect of peer pressure on the incentives offered by a principal, supposing that there are two agents who make costly efforts to produce a single output. The agents are rewarded by the principal, contingent on the realized output. In addition to this pecuniary payoff, we consider...

Abstract This paper studies the optimal organizational form and the optimal type of manager by considering the nonmaterial (psychological) payoff as well as the standard material payoff for agents. I compare two organizational forms: T-form, where all agents have the same job title so that they...