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Competitive Preferences and Status as an Incentive Experimental Evidence Gary Charness David Masclet Marie Claire Villeval 17 June 2010 Abstract In this paper we investigate individuals investment in status in an environment where no monetary return can possibly be derived from reaching a better relative position We use a real effort experiment in which we permit individuals to learn and potentially improve their status 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 relative performance and people pay both to sabotage others output and to artificially increase their own relative performance In addition stronger group identity favors positive rivalry and discourages sabotage among peers Keywords Status seeking rank competitive preferences experiment JEL Classifications C91 C92 M54 D63 J28 J31 Contact Gary Charness Department of Economics University of California Santa Barbara 2127 North Hall Santa Barbara CA 93106 9210 E mail charness econ ucsb edu David Masclet CREM CNRS University of Rennes 7 place Hoche 35000 Rennes France and CIRANO Montreal Canada E mail david masclet univ rennes1 fr Marie Claire Villeval GATE CNRS University of Lyon 93 Chemin des Mouilles 69130 Ecully France IZA Bonn Germany and CCP Aarhus Denmark E mail villeval gate cnrs fr Acknowledgments The authors thank Nagore Iriberri for comments on a previous version of this paper and Elven Priour for programming the experiment Financial support from the Agence Nationale de la Recherche ANR 08 JCJC 0105 01 CONFLICT project and ANR BLAN073 185547 EMIR project is gratefully acknowledged 1 INTRODUCTION While standard economic theory assumes that individuals only care about their individual payoffs there are many situations in which people exhibit a strong concern for social comparisons and status In economics social comparisons have been shown to influence both behavior see for example Glaeser et al 1996 on criminal activity Duflo and Saez 2002 on investment plans G th et al 2001 Charness and Kuhn 2007 G chter and Th ni 2009 and Clark 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 when people care about their status in their reference group Theoretical models have shown that the willingness to pay for status influences efficiency and income redistribution see for example Allgood 2006 Hopkins and Kornienko 2009 A few experimental studies in economics demonstrate both the importance given by individuals to status and how it affects behavior in negotiations 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 an environment without any expected monetary return from such activity Indeed in most of the experimental 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 and Vostroknutov 2008 In this paper we define status as the individuals relative standing in their group and we isolate the pure willingness of individuals to invest in status seeking activities and 1 its impact on real effort Everyday life provides numerous examples in which people invest resources in status seeking to be at the top of the social scale Human resource managers also take advantage of this concern for social position through policies such as assigning symbolic rewards to the employee of the month Status seeking seems to be strongly related to competition among individuals The study of evolution in biology and anthropology has shown how competition involves status and how status structures societies 1 In the same vein the existence of competitive preferences identified in economics Charness and Grosskopf 2001 Charness and Rabin 2002 may motivate people to engage in such status seeking activities 2 Status seeking may be related to the desire for dominance in competition This has been documented both in animals and in humans as dominance better secures the access to food or to mates However we would like to be clear that status seeking and competitive preferences are not isomorphic Status seeking typically involves some form of public recognition while a taste for competitive preferences does not depend on such recognition Of course receiving a symbolic reward may matter even in the absence of observability by others if it affects self esteem In this study however we are chiefly interested in social status and we do not aim at disentangling these two dimensions While one motivation for costly status seeking is the expectation of eventual monetary benefits 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 nonobservable abilities it may help people to match with people of similar ability which will be payoff maximizing in case 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 1200 for the other person while receiving 600 for herself regardless of her choice A number of people choose to allocate less than 600 One example was the individual who chose 599 for the paired participant 2 derived from the competition 3 Indeed many people engage in behavior such as investing in costly 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 may be willing to make costly decisions when engaged in a contest if the outcome of the competition says something about the underlying factors of the ranking i e if a higher lower rank in terms of performance means a higher lower rank in the social scale Individuals may therefore make costly choices to improve their status if they believe that others will interpret

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