European Business Schools Librarian's Group

IESE Research Papers,
IESE Business School

No D/645: Peer pressure and inequity aversion in the Japanese firm

Gianandrea Staffiero ()
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Gianandrea Staffiero: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN

Abstract: We present an explanation of the high frequency of team production and high level of peer monitoring found in Japanese firms, in terms of a simple and empirically grounded variation in individual utility functions. We argue that Japanese agents are generally characterized by a higher degree, with respect to their Western counterparts, of aversion to unfavorable inequality, a feature which explains seemingly puzzling experimental evidence. In combination with long term employment and various organizational practices, this creates the conditions for obtaining willingness to exert mutual monitoring and peer pressure which facilitates the convergence towards cooperative equilibria in dilemma type situations.

Keywords: Team Production; Fairness; Cooperation; Punishment; Reciprocity

JEL-codes: C91; C92; D63; H41; L23

26 pages, September 5, 2006

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