We provide an explanation for peer pressure in teams based on inequity aversion. Analyzing a two-period model with two agents, we …nd that the e¤ect of inequity aversion strongly depends on the information structure. When contributions are unobservable, agents act as if they were purely sel…sh. However, when contributions are made transparent at an interim stage, agents exert higher e¤orts in the …rst period and adjust their e¤orts according to the interim information in the second period. This form of peer pressure reduces free-riding and thus, more e¢ cient outcomes are attained. The results are con…rmed in a real e¤ort experiment.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in SOEPpapers on Multidisciplinary Panel Data Research at DIW BerlinThis series presents research findings based either directly on data from the German SocioEconomic Panel Study (SOEP) or using SOEP data as part of an internationally comparable data set (e.g. CNEF, ECHP, LIS, LWS, CHER/PACO). SOEP is a truly multidisciplinary household panel study covering a wide range of social and behavioral sciences: economics, sociology, psychology, survey methodology, econometrics and applied statistics, educational science, political science, public health, behavioral genetics, demography, geography, and sport science.The decision to publish a submission in SOEPpapers is made by a board of editors chosen by the DIW Berlin to represent the wide range of disciplines covered by SOEP. There is no external referee process and papers are either accepted or rejected without revision. Papers appear in this series as works in progress and may also appear elsewhere. They often represent preliminary studies and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be requested from the author directly.Any opinions expressed in this series are those of the author(s) and not those of DIW Berlin.Research disseminated by DIW Berlin may include views on public policy issues, but the institute itself takes no institutional policy positions. AbstractTo examine the influence of working hours on employees' satisfaction, this article uses a large, representative set of panel data from German households (GSOEP).The results show that high working hours and overtime in general do not lead to decreased satisfaction. Rather, increasing working hours and overtime have positive effects on life and job satisfaction, whereas the desire to reduce working hours has a negative impact on satisfaction. In 2009, nearly 60% of employees wanted to reduce their working hours. The overall number of hours by which employees want to reduce their working time is driven mainly by overtime compensation.JEL-Classification: J22, J28, J81, M12

This paper analyzes whether effort provision in entrepreneurial teams depends on the size of the team, assuming that size determines the strength of freeriding and peer pressure effects in entrepreneurial teams. We provide a theoretical model and empirical analyses to explain the joint effect of free-riding and peer pressure on effort in start-up teams. We begin with an economic model by Kandel and Lazear in J Polit Econ 100(4):801-817, (1992) and enrich it using insights from entrepreneurship research. Based on our model, we first hypothesize that with increasing team size in entrepreneurial teams, the efforts of the individual team founders should follow an inverted U-shaped pattern. Second, we argue that the peer pressure effect is stronger if team members have stronger social ties, and thus we expect the effort-maximizing team size to be larger in teams with stronger social ties. Using a data set from 214 German start-up teams, we find that our hypotheses are supported by the data.

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An owner delegates investment decisions to a better informed manager whose time preferences are unknown to the owner. Due to exogenous capital constraints, not all profitable projects can be undertaken, and therefore the owner wants the manager to select the NPV-maximizing set of projects. We show that the relative benefit cost allocation scheme proposed by prior literature does not solve this problem. Adopting the same information structure as in Rogerson (J Polit Econ 105, 770-795, 1997) and Reichelstein (Rev Account Stud 2, 157-180, 1997), we demonstrate how to obtain robust goal congruence using residual income. The resulting revenue recognition and cost allocation rules lead to a performance measure reflecting the expected NPV-ranking of projects in each and every period.

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This paper examines the influence of goal-setting on worker performance in an industrial production process. For empirical examination, we conducted a real-effort experiment at the Training Factory for Energy Productivity at the Technische Universität München. The participants' performance was measured by checking for quantity and quality of the assembled products and furthermore by recording the consumed compressed air per finished good. In total four groups were defined, each group in a different experimental setting. This experiment is the first one ever conducted related to goal-setting in an industrial production setting and thus adds valuable results to academia and practitioners in the field of sustainable manufacturing. The major results are that even without financial incentives goal-setting improves worker performance by 12 to 15% compared to the situation where no goals were defined. This holds true for the groups which had to maximize either output quantity or output quality, as well as for the group which was obliged to be as energy efficient as possible.