Competitive Preferences and Status as an Incentive:Experimental EvidenceGary Charness, David Masclet, Marie Claire Villeval17 June 2010Abstract: In this paper, we investigate individuals’ investment in status in an environment whereno monetary return can possibly be derived from reaching a better relative position. We use areal-effort experiment in which we permit individuals to learn and potentially improve theirstatus (rank). We find that people express both intrinsic motivation and a taste for status.Indeed, people increase their effort when they are simply informed about their relativeperformance, and people pay both to sabotage others’ output and to artificially increase their ownrelative performance. In addition, stronger group identity favors positive rivalry and discouragessabotage among peers.Keywords: Status seeking, rank, competitive preferences, experimentJEL Classifications: C91, C92, M54, D63, J28, J31Contact: Gary Charness, Department of Economics, University of California, Santa Barbara,2127 North Hall, Santa Barbara, CA 93106-9210. E-mail: [email protected]. DavidMasclet, CREM, CNRS, University of Rennes, 7 place Hoche, 35000 Rennes, France, andCIRANO, Montreal, Canada. E-mail: [email protected]. Marie Claire Villeval,GATE, CNRS, University of Lyon, 93 Chemin des Mouilles, 69130, Ecully, France, IZA, Bonn,Germany, and CCP, Aarhus, Denmark. E-mail: [email protected]: The authors thank Nagore Iriberri for comments on a previous version of thispaper and Elven Priour for programming the experiment. Financial support from the AgenceNationale de la Recherche (ANR-08-JCJC-0105-01, “CONFLICT” project, and ANR BLAN07-3_185547 “EMIR” project) is gratefully acknowledged.11. INTRODUCTIONWhile standard economic theory assumes that individuals only care about their individualpayoffs, there are many situations in which people exhibit a strong concern for socialcomparisons and status. In economics, social comparisons have been shown to influence bothbehavior (see for example Glaeser et al., 1996, on criminal activity; Duflo and Saez, 2002, oninvestment plans; Güth et al. 2001, Charness and Kuhn, 2007, Gächter and Thöni, 2009, andClark et al., 2010, on effort in employer-employee relationships) and subjective well-being(Clark and Oswald, 1996; Clark et al., 2008; Brown et al., 2008; Ferrer-i-Carbonell, 2005;Luttmer, 2005; Azmat and Iriberri, 2010). Social comparisons are especially important whenpeople care about their status in their reference group. Theoretical models have shown that thewillingness to pay for status influences efficiency and income redistribution (see for exampleAllgood, 2006, Hopkins and Kornienko, 2009). A few experimental studies in economicsdemonstrate both the importance given by individuals to status and how it affects behavior innegotiations (Ball and Eckel, 1996), markets (Ball and Eckel, 1998; Ball et al., 2001),coordination games (Eckel and Wilson, 2007), and organizations either in cooperative settings(Kumru and Vesterlund, 2008; Eckel et al., 2009) or in competitive settings (Huberman et al.,2004; Rustichini and Vostroknutov, 2008).However, none of these studies investigates people’s investment in status seeking in anenvironment without any expected monetary return from such activity. Indeed, in most of theexperimental studies cited above, status is given exogenously and it is provided without any cost(with the exception of Ball and Eckel, 1998; Huberman et al., 2004; Rustichini andVostroknutov, 2008). In this paper, we define status as the individuals’ relative standing in theirgroup and we isolate the pure willingness of individuals to invest in status-seeking activities and2its impact on real effort. Everyday life provides numerous examples in which people investresources in status seeking to be at the top of the social scale. Human-resource managers alsotake advantage of this concern for social position through policies such as assigning symbolicrewards to the employee of the month. Status seeking seems to be strongly related tocompetition among individuals. The study of evolution in biology and anthropology has shownhow competition involves status and how status structures societies.1In the same vein, the existence of competitive preferences identified in economics(Charness and Grosskopf, 2001; Charness and Rabin, 2002) may motivate people to engage insuch status-seeking activities.2 Status seeking may be related to the desire for dominance incompetition. This has been documented both in animals and in humans, as dominance bettersecures the access to food or to mates. However, we would like to be clear that status-seekingand competitive preferences are not isomorphic. Status-seeking typically involves some form ofpublic recognition, while a taste for competitive preferences does not depend on suchrecognition. Of course, receiving a symbolic reward may matter even in the absence ofobservability by others if it affects self-esteem. In this study, however, we are chiefly interestedin social status and we do not aim at disentangling these two dimensions. While one motivation for costly status seeking is the expectation of (eventual) monetarybenefits, this behavior is also observed when no immediate or delayed monetary return can be 1 Status seeking may be also related to matching among individuals. For example, if social status signals non-observable abilities, it may help people to match with people of similar ability, which will be payoff-maximizing incase of complementary interactions (Rege, 2008). We do not investigate this dimension in our paper.2 In one allocation task in Charness and Grosskopf (2001), a person could choose any amount between 300 and 1200for the other person while receiving 600 for herself regardless of her choice. A number of people choose to allocateless than 600. One example was the individual who chose 599 for the paired participant.3derived from the competition.3 Indeed, many people engage in behavior such as investing incostly status symbols and conspicuous consumption of positional goods (Duesenberry, 1949;Veblen, 1949; Frank, 1985), or striving for status and public display of status as a goal in itself(Huberman et al., 2004).As shown in Rustichini (2008), humans