Nonbinding Peer Review and Effort in Teams

Abstract

Individuals tend to free-ride in teams, thus providing inefficiently low effort. We implement a system of confidential peer review in a randomly selected set of teams, whereby teammates complete an online survey to review the effort of their peers. These reviews are not linked to any rewards or sanctions, thus making them nonbinding. We find that nonbinding peer reviews increase effort and team productivity and do not decrease worker morale. The effects are stronger for low-ability individuals in low-ability teams, where the traditional forces of peer effects may be absent.