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Contests for Status

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  • Moldovanu, Benny
  • Sela, Aner
  • Shi, Xianwen

Abstract

We study the optimal design of organizations under the assumption that agents in a contest care about their relative position. A judicious definition of status categories can be used by a principal in order to influence the agents’ performance. We first consider a pure status case where there are no tangible prizes. Our main results connect the optimal partition in status categories to various properties of the distribution of ability among contestants. The top status category always contains an unique element. For distributions of abilities that have an increasing failure rate, a proliferation of status classes is optimal, while in other cases the optimal partition involves some coarseness. Finally, we modify the model to allow for status categories that are endogenously determined by monetary prizes of different sizes. If status is solely derived from monetary rewards, we show that the optimal partition in status classes contains only two categories.

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Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 139.

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Date of creation: Jul 2005
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Handle: RePEc:trf:wpaper:139

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  1. Glazer, Amihai & Konrad, Kai A, 1996. "A Signaling Explanation for Charity," American Economic Review, American Economic Association, American Economic Association, vol. 86(4), pages 1019-28, September.
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  3. Gary S. Becker & Kevin M. Murphy & Ivan Werning, 2005. "The Equilibrium Distribution of Income and the Market for Status," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(2), pages 282-310, April.
  4. Moldovanu, Benny & Sela, Aner, 1999. "The Optimal Allocation of Prizes in Contests," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim 99-75, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  5. Sheryl Ball & Catherine Eckel & Philip J. Grossman & William Zame, 2001. "Status In Markets," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(1), pages 161-188, February.
  6. Pradeep Dubey & John Geanakoplos, 2004. "Grading Exams: 100, 99, ..., 1 or A, B, C? Incentives in Games of Status," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1467, Cowles Foundation for Research in Economics, Yale University.
  7. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," ESE Discussion Papers 92, Edinburgh School of Economics, University of Edinburgh.
  8. Postlewaite, Andrew, 1998. "The social basis of interdependent preferences," European Economic Review, Elsevier, vol. 42(3-5), pages 779-800, May.
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  11. Rick Harbaugh & Tatiana Kornienko, 2000. "Local Status and Prospect Theory," Claremont Colleges Working Papers, Claremont Colleges 2000-38, Claremont Colleges.
  12. Milton Friedman, 1953. "Choice, Chance, and the Personal Distribution of Income," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 61, pages 277.
  13. Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 56, pages 279.
  14. Chaim Fershtman & Yoram Weiss, 1991. "Social Status, Culture and Economic Performance," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1007, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  16. Brown, Gordon D. A. & Gardner, Jonathan & Oswald, Andrew J. & Qian, Jing, 2005. "Does Wage Rank Affect Employees' Wellbeing?," IZA Discussion Papers 1505, Institute for the Study of Labor (IZA).
  17. Bagwell, Laurie Simon & Bernheim, B Douglas, 1996. "Veblen Effects in a Theory of Conspicuous Consumption," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 349-73, June.
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  19. Larry Samuelson, 2004. "Information-Based Relative Consumption Effects," Econometrica, Econometric Society, Econometric Society, vol. 72(1), pages 93-118, 01.
  20. Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, Econometric Society, vol. 60(4), pages 837-57, July.
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