AbstractThis paper investigates interactions between co‐worker productivity levels in a rich empirical context. Workers have unambiguous output measures, compensation that depends on individual and group output to differing degrees and potential peers beyond their immediate work group. Important productivity interdependencies exist, which could arise from the group‐based component of compensation, peer pressure, common supervisors or information exchanges, but not group‐based output or technological interdependence. Workers with the strongest individual incentives seem least sensitive to these interactions. In contrast, they are important to workers with no individual incentives. For these workers, peer pressure must be a powerful influence. Copyright © 2003 John Wiley & Sons, Ltd.