Contests for Status

Economics

Speaker:Aner Sela, Ben-Gurion University
Date: Tuesday 14 February 2006
Time: 16:15
Location: Lecture Room D, Streatham Court

Further details

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. (JEL D44, J31, D72, D82)