Peer Effects in an Automated World

•Automation transforms the social context of the workplace by weakening peer effects.•Using a novel experimental task, we show that humans who work with algos underperform those who work with other humans.•This negative effect of automation is due to weaker peer effects.•The negative effect of automation is magnified under team incentives.•Our findings stress that firms should account for the weakening of peer effects due to automation when assessing the cost-efficiency of replacing humans with algos. Beyond its technological impact, automation also transforms the social context of the workplace by weakening peer effects. We study the often-neglected effects of this transformation on work production. Using experiments in which people complete a sequential task, we show that humans who work with algorithms underperform those who work with other humans, especially when workers are rewarded under team incentives. Our findings stress that firms should account for the weakening of peer effects due to automation when assessing the cost-efficiency of replacing humans with algorithms.