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The Power of Positional Concerns: A Panel Analysis

  • Benno Torgler
  • Sascha L. Schmidt
  • Bruno S. Frey

Many studies have established that people care a great deal about their relative economic position and not solely, as standard economic theory assumes, about their absolute economic position. However, behavioral evidence is rare. This paper provides an empirical analysis on how individuals’ relative income position affects their performance. Using a unique data set for 1040 soccer players over a period of eight seasons, our analysis suggests that if a player’s salary is below the average and this difference increases, his performance worsens and the productivity decreasing effects of positional concerns are stronger. Moreover, the larger the income differences within a team, the stronger positional concern effects are observable. We also find that the more the players are integrated in a particular social environment (their team), the more evident a relative income effect is. Finally, we find that positional effects are stronger among high performing teams.

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Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 212.

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Length: 54
Date of creation: 01 Feb 2007
Publication status: Published
Handle: RePEc:qut:dpaper:212
Note: Benno Torgler, Benno Torgler, The School of Economics and Finance, Level 8, Z Block, Gardens Point Campus, 2 George Street, Brisbane, QLD 4001, Australia, email: benno.torgler@qut.edu.au. Sascha L. Schmidt, European Business School, Oestrich Winkel, Germany. He is also associated with the Institute of Management, University of St. Gallen, Dufourstrasse 40a, 9000 St. Gallen, Switzerland, email: sascha.schmidt@unisg.ch. Bruno S. Frey, Institute for Empirical Research in Economics, University of Zurich, Switzerland, email: bsfrey@iew.unizh.ch. Torgler and Frey are also associated with CREMA – Center for Research in Economics, Management and the Arts, Switzerland. Please address all correspondence to Benno Torgler. We wish to thank Margit Osterloh, Eduardo Engel, Bruno Heyndels, Doris Aebi and Rosemary Brown and participants of a seminar at Monash Universit, the University of Zurich, and Wesleyan University, especially John P. Bonin, Ross Booth, Alain Cohn, Dietrich Fausten, Peter Forsyth, Lorenz Goette, Holger Herz, Joyce Jacobsen, Elias Khalil, Michael Kosfeld, Simon Luechinger, Francisco Rafael Rodriguez, Imai Masami, Pushkar Maitra, Michael Naef, Susanne Neckermann, Yew-Kwang Ng, Wendy Rayack, Cameron A. Shelton, Gilbert L. Skillman, Russell Smyth, and Christian Zehnder for their helpful comments and suggestions.
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