Contests for Status

Posted: 23 Apr 2007

See all articles by Benny Moldovanu

Benny Moldovanu

University of Bonn - Chair of Economic Theory II; Centre for Economic Policy Research (CEPR)

Aner Sela

Ben-Gurion University of the Negev - Department of Economics; Centre for Economic Policy Research (CEPR)

Xianwen Shi

University of Toronto - Department of Economics

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Abstract

We study the optimal design of organizations under the assumption that agents in a contest care about their relative position. A principal determines the number and size of status categories in order to maximize output. We first consider the pure status case without tangible prizes. Our results connect the optimal partition in status categories to properties of the distribution of ability among contestants. The top status category always contains a unique element. For distributions that have an increasing failure rate (IFR), a proliferation of status classes is optimal, whereas the optimal partition involves only two categories if the distribution of abilities is sufficiently concave. Moreover, for IFR distributions, a coarse partition with two status categories achieves at least half of the output obtained in the optimal partition with many categories. Finally, if status is derived solely from monetary rewards, we show that the optimal partition in status classes contains only two categories.

Suggested Citation

Moldovanu, Benny and Sela, Aner and Shi, Xianwen, Contests for Status. Journal of Political Economy, Vol. 115, April 2007, Available at SSRN: https://ssrn.com/abstract=981453

Benny Moldovanu (Contact Author)

University of Bonn - Chair of Economic Theory II ( email )

Lennestrasse 37
53113 Bonn
Germany
+49 228 736395 (Phone)
+49 228 737940 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Aner Sela

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
+972 8 647 2309 (Phone)
+972 8 647 2941 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Xianwen Shi

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S3G7
Canada

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