Peer Effects under Different Relative Performance Feedback and Grouping Procedures

We investigate the role of peer-group composition and relative performance feedback in effort choice. In a theory-guided lab experiment, groups are formed either randomly or based on ability. The members receive either the best or the average performance of the group as feedback. We find that men perform better when they compare themselves with the best instead of the average peer, while the opposite is true for women. For the group composition, we find that men benefit from random grouping, while women benefit from ability grouping. These effects are explained by different (nonlinear) reactions to the reference point.