This is a really neat study. The basic point is summed up as: "the motivation to succeed decreases as the number of [people, or, N] rises.
I can say from personal experience that strikes me as being accurate. When I used to work out at LA Fitness if it were the middle of the week and only a hand-full of people who were working out hard, I would tend to focus on them and work hard. But if I went on a busy weekend I would just do what I thought was my 'typical' workout.
This is true for classes I've been in too. In a small class of 20 or 30 people, I remember focusing on really doing my best to 'compete' with others in terms of class participation (yes, I was one of those annoying students) - because I loved the feel of 'debate' and the personal competition. Groups of us would even compare grades and we would feed off each other. But with a large lecture of 100+ students, there is little motivation to even attempt to compete/compare with so many people.