Working Papers in Economics,
University of Bergen, Department of Economics

Abstract: This paper investigates dynamic peer effects in a sales company where workers operate in teams and receive a bonus that depends on both individual worker and team sales. We examine how the past productivity of co-workers affects the current individual performance of team members. To address this question, we employ weekly productivity and administrative data obtained from the customer service center of an insurance company. We find evidence that the past performance of team co-workers influences current performance, and that this effect is larger for agents that ranked in the bottom quartile of team performance in the previous period. The effects are also strongest when bonuses depend on team performance. Overall, our findings suggest that peer effects may alleviate the free-rider problem often associated with team bonuses.

Keywords: Peer effects; dynamic panel data; team incentives; sales organizations

JEL-codes: C23; D22; J33; M52

35 pages, November 1, 2013

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