Status Seeking Research Articles

Relative performance or team evaluation? Optimal contracts for other-regarding agents

This paper derives optimal incentive contracts for agents with other-regarding preferences. It offers a behavioral explanation for the empirically observed lack of relative performance evaluation. We analyze a principal-multi agent model and assume that agents are inequity averse or status seeking. We show that team contracts can be optimal even if the agents’ performance measures are positively correlated such that relative performance evaluation would be optimal with purely self-interested agents and even though relative performance evaluation provides additional incentives to provide effort if agents have other-regarding preferences. Furthermore, optimal incentive contracts for other-regarding agents can be low-powered as compared to contracts for purely self-interested agents.

Accounting for Social Spending Escalation in Rural China

It has been widely recognized that the poor spends a significant proportion of their income on social spending even at the expense of basic consumption. What are the motives behind the observed lavish social spending among the poor? We attempt to test three competing explanations at the social link level, risk-pooling, peer effect, and status concern, via a uniform framework based on a unique primary dataset. The data set include household information from a three-wave census-type household survey as well as a long-term gift record for all households in three villages in a poor region in rural China. Our dyadic estimations confirm the prevalence of peer influence and the status seeking motive in shaping gift spending and its rapid growth, while risking pooling is not a significant explanatory factor. A 1% increase in peers' gift spending per occasion leads to a 0.13% - 0.34% increase in one's own gift per occasion, depending on whether household fixed effect or pairwise fixed effect dyadic model is estimated. Status seeking for the bottom 25% and the middle 50% groups significantly pushes up gift expenditure. Moreover, large windfall income and marriage market pressure further intensify status competition, escalating gift giving behavior.

Lex talionis: Testosterone and the law of retaliation

Research examining both the organizing and activating effects of testosterone in one-shot bargaining contexts has been vexed by inconsistencies. Some research finds that high-testosterone men are more likely to reject unfair offers in an ultimatum game and exogenous administration of testosterone to men leads to less generous offers. In contrast, other research finds that higher prenatal exposure to testosterone predicts more generous dictator game offers and administering testosterone to women leads to more generous ultimatum game offers. The current research seeks to resolve these inconsistencies by examining how the organizing effects of testosterone affect bargaining behavior. Because testosterone is associated with status seeking and concerns with social reputation, we hypothesized that testosterone would predict aggressive bargaining but only after provocation. Two studies found that prenatal testosterone exposure, as measured by 2D:4D ratio, led to aggressive responses for both males and females, but only after they received unfair offers. Furthermore, perceptions of fairness violations moderated but did not mediate the effect of testosterone on retributional responding. These results suggest that the organizing effects of testosterone have consistent effects on bargaining behavior for both males and females but its predictive ability requires some form of provocation to emerge.

The Roles of Consumers Need for Uniqueness and Status Consumption in Haute Couture Luxury Brands

Abstract A vast body of knowledge exists regarding the attitudes involved in the consumption of luxury brands. The purchase of products for their symbolic and social value rather than for their inherent utility is now widely recognised as a significant determinant of consumer behaviour (Mason, 1992). With changes in industry trends, gaps in knowledge are created. Thus, it is important to examine luxury brands in relation to uniqueness. Moreover, whether consumers need for uniqueness is in fact a need for status in this younger emerging market (Clark, Zboja, and Goldsmith, 2007). The Australian Generation Y market is a dynamic and extremely competitive environment (Phau and Leng 2008). It encompasses 26% of the adult population (Khoo and Conisbee 2008) with the benefit of offering a market segment open to generalisations. Thanks to a decrease in the affordability of the housing market the average disposable income has increased and as a result Generation Y has enormous spending potential. In 2015 Generatio...

Status and welfare under monopolistic competition

This article departs from the traditional welfare analysis of social status seeking by incorporating scale economies, product differentiation, and monopolistic competition into a model. I argue that social status seeking could be welfare improving rather than the usual conclusion that social status seeking is welfare-reducing, under some assumptions that are not particularly strong. Market distortions of the quantity–variety and consumption–leisure trade-off may be corrected by social status seeking. Since modern societies are arguably closer to monopolistic competition than perfect competition, we may also need to rethink the long-held belief that the welfare effects caused by social status seeking are usually negative.

PIECE‐RATE CONTRACTS FOR OTHER‐REGARDING WORKERS

When workers are paid with piece rates, inequality arises naturally. We consider workers who care about income comparisons and are either status seeking or inequality averse. We identify circumstances under which inequality attitudes lead workers to exert more effort than they would otherwise, and also circumstances under which workers’ inequality attitudes lead firms to set lower piece rates than they would otherwise. The key behavioral assumption for both of these results to hold when workers are identical is behindness aversion, the property that changes in inequality matter more to the worker when he is behind than when he is ahead. (JEL D01, J33, M52)

Equilibrium Social Hierarchies: A Non-Cooperative Ordinal Status Game

We analyze a game in strategic form, where each player's payoff depends on his action and his social status, which is given by his rank in the actions distribution. Our focus is on the relation between the degree of heterogeneity among status-seeking players and the distribution of their Nash equilibrium actions. We find that if among players intrinsic concerns are sufficiently important relative to status concerns, individual equilibrium actions diverge, but if status concerns are relatively important, individual equilibrium actions are the same. Another key result of the analysis is that, in contrast to what is usually claimed, status seeking need not always be socially inefficient. If players are sufficiently heterogeneous, there exists a Nash equilibrium that is unique, separating, and Pareto efficient.

Positional spending and status seeking in rural China

Focusing on a remote area in rural China, we use a panel census of households in 26 villages to show that socially observable spending has risen sharply in recent years. We demonstrate that such spending by households is highly sensitive to social spending by other villagers. This suggests that social spending is either positional in nature (i.e., motivated by status concerns) or subject to herding behavior. We also document systematic relations between social spending and changes in higher order terms of the income distribution. We find that the implications of status seeking for spending are not unidimensional—they vary across income groups and expenditure categories. In particular, and consistent with theories of rank-based status seeking, we find that the poor increase spending on funerals and gifts as competition for status intensifies. In addition, poor families of grooms expend more for wedding ceremonies as local income competition increases, while the families of brides do not. The welfare implications of spending in order to "keep up with the Joneses" are potentially large, particularly for poor households.

Dowry, Women, and Law in Bangladesh

Dowry increased with the expansion of capitalist relations that help capital accumulation by men in Bangladesh. It has been turned into ‘demand, extortion, material gain, and profit maximization’. The most common motives behind the dowry system are the grooms’ and their families’ greed, growing consumerism, excessive materialism, the need for status seeking, and rising expectations of a better and luxurious life. The dowry system has shifted as a result of women’s increasing paid labour force activity. In most of the cases, husbands or in-laws control and appropriate women’s income. Husbands consider their wives’ income as a source of wealth accumulation. This must be acknowledged as reality and the Dowry Prohibition Act amended. In this article I argue that appropriation of wives’ income or controlling wives’ income should be considered as dowry and therefore as a criminal offence. Dowry has now become more significant than dower in Bangladesh. Dower is religiously sanctioned but dowry is not supported by state or personal laws. Dower is an essential part of Muslim marriage in Bangladesh. Islamic law does not specify any maximum amount of dower but makes it obligatory for a husband to pay whatever amount has been fixed and whatever amount is assessed if not fixed ( Monsoor, 2008: 24). Dower is paid by the husband to his wife out of honour and respect and to show that he seriously desires to marry her with a sense of responsibility and obligation (Monsoor, 2003). Dowry, in contrast, refers to ‘the transmission of large sums of money, jewellery, cash, and other goods from the bride’s family to the groom’s family’ (Monsoor, 2003). The dowry system increases the vulnerability of women in Bangladesh, turning them into liabilities for their family. After Bangladesh became independent on 16 December 1971, the problem of dowry became so widespread that women activists and some

Book review—the intertwining of psychology and economics: Free goods, pirate organization, and status seeking

Book review—the intertwining of psychology and economics: Free goods, pirate organization, and status seeking

Relative Performance or Team Evaluation? Optimal Contracts for Other-Regarding Agents

This paper derives optimal incentive contracts for agents with other-regarding preferences. It offers a behavioral explanation for the empirically observed lack of relative performance evaluation. We analyze a principal-multi agent model and assume that agents are inequity averse or status seeking. We show that team contracts can be optimal even if the agents' performance measures are positively correlated such that relative performance evaluation would be optimal with purely self-interested agents and even though relative performance evaluation provides additional incentives to provide effort if agents have other-regarding preferences. Furthermore, optimal incentive contracts for other-regarding agents can be low-powered as compared to contracts for purely self-interested agents.

Spent: sex, evolution, and consumer behavior

A leading evolutionary psychologist probes the hidden instincts behind our working, shopping, and spending Evolutionary psychology-the compelling science of human nature-has clarified the prehistoric origins of human behavior and influenced many fields ranging from economics to personal relationships. In Geoffrey Miller applies this revolutionary science's principles to a new domain: the sensual wonderland of marketing and status seeking that we call American consumer culture. Starting with the basic notion that the goods and services we buy unconsciously advertise our biological potential as mates and friends, Miller examines the hidden factors that dictate our choices in everything from lipstick to cars, from the magazines we read to the music we listen to. With humor and insight, Miller analyzes an array of product choices and deciphers what our decisions say about ourselves, giving us access to a new way of understanding-and improving-our behaviors. Like Freakonomics or The Tipping Point, Spent is a bold and revelatory book that illuminates the unseen logic behind the chaos of consumerism and suggests new ways we can become happier consumers and more responsible citizens.

Veblen and the Theory of the Backpacker Leisure Class: Status Seeking and Emulation in the Australian Contemporary Tourist Economy

In 1899 Thorstein Veblen wrote a seminal monograph on the subject of consumption and leisure. His work, The Theory of the Leisure Class, is one of the most enduring examples of status-seeking individuals' conspicuous consumption and conspicuous leisure practices, particularly when applied to the tourist industry, and furthermore, is still relevant in today's economic climate. This article develops an independent theory of backpackers and how they can be perceived as undertaking conspicuous consumption and conspicuous leisure practices. This is done using Veblen's work as a foundation. Qualitative methods using in-depth interviews and participant observation techniques are employed to obtain data from 41 participants. The findings serve to highlight the fact that Veblen's thesis is as relevant today as it was when it was written in 1899.

Conspicuous Consumption and Race*

Using nationally representative data on consumption, we show that Blacks and Hispanics devote larger shares of their expenditure bundles to visible goods (clothing, jewelry, and cars) than do comparable Whites. These differences exist among virtually all subpopulations, are relatively constant over time, and are economically large. Although racial differences in utility preference parameters might account for a portion of these consumption differences, we emphasize instead a model of status seeking in which conspicuous consumption is used as a costly indicator of a household's economic position. Using merged data on race- and state-level income, we demonstrate that a key prediction of the status-signaling model—that visible consumption should be declining in reference group income—is strongly borne out in the data for each racial group. Moreover, we show that accounting for differences in reference group income characteristics explains most of the racial difference in visible consumption.

International status seeking, trade, and growth leadership

Abstract We study a two‐country endogenous growth model where the utility of agents in developing countries is affected by consumption gaps with advanced economies. International status seeking tends to revert growth differentials in favour of the developing country. Preferences with endogenous status desire generate convergence in growth rates in the presence of structural gaps and convergence in income levels if productivity differences disappear. This process is driven by declining terms of trade and faster capital accumulation of the status seeker. The model predictions are shown to be consistent with the stylized facts that characterized the growth performance of East Asian economies.

Symbolic interactionism: Artful inquiry

The ubiquitous use of social networking sites (SNS) has resulted in the blurring of individual's private and professional social worlds. As the use of SNS in the workplace grows, it has been studied along a number of dimensions such as its impact on boundary spanning, the advancement of careers, and campaigning for projects. Earlier research on the personal use of SNS has explored user motivations and benefits of participating in SNS including social capital, status seeking, narcissism, self-esteem, and professional identity. However, these studies attempt to describe with static frameworks what we discover to be a dynamic, cyclical process of creation and consumption of self-identity. We conducted a qualitative research study using a grounded theory approach with semi-structured interviews of SNS users, discovering that the creation and consumption of user generated content (UGC) are symbolic interactions, which recursively produce and consume the users' self-identities on SNS. This cyclical framework for explaining the role of self-identity on SNS is a novel finding with broad implications for understanding the use of SNS, especially in the workplace.

Education, dynamic signalling, and social distance

In many European countries the average level of education has grown steadily over the last few generations. The paper shows how such a trend can be easily rationalized by a model that extends a standard signalling game in two directions. First, a temporal structure is induced by having two different cohorts of individuals playing the game. Second, to standard rational agents, the model postulates the existence of two classes of agents that care about their relative position in the distribution of educational choices. Conformist individuals wish to be close to the average level; status seeking individuals seek to be above it. Results show that the presence of these two classes of individuals generates an average level of education that changes and increases over time for a wide range of choice of parameters. Consequences of this increasing level of education on the behaviour of the firms are also explored. Copyright 2009 , Oxford University Press.

Games of status and discriminatory contracts

Following recent empirical evidence which indicates the importance of rank for the determination of workers' wellbeing, this paper introduces status seeking preferences in the form of rank-dependent utility functions into a moral-hazard framework with one firm and multiple workers, but no correlation in production. We show that workers' concern for the rank of their wage in the firm's wage distribution induces the firm to offer discriminatory wage contracts when its aim is to induce all workers to expend effort.

Fragwürdige Luxussteuern: Statusstreben und demonstratives Konsumverhalten in der Geschichte ökonomischen Denkens / Questionable Luxury Taxes: Status Seeking and Conspicuous Consumption in the History of Economic Thought

Zusammenfassung Luxus, Statusstreben und demonstratives Konsumverhalten werden in der Geschichte ökonomischen Denkens bis heute immer wieder unterschiedlich betrachtet. So wundert es nicht, dass auch die Antwort auf die Frage, welche Rolle der Staat im Hinblick auf statusbedingtes Konsumverhalten einnehmen soll, je nach Perspektive und historischem Hintergrund unterschiedlich ausfällt. Der vorliegende Beitrag zeigt, wie Statusstreben und demonstratives Konsumverhalten in der Geschichte ökonomischen Denkens gesehen wurden und ordnet aktuelle Beiträge ein. Da die Politikempfehlungen einerseits auf der Modellierung von Statusstreben als Nullsummenspiel und somit einer modelltechnischen Beliebigkeit sowie zudem teilweise auf einer unzulässigen komparativen Wohlfahrtsanalyse fußen, und Luxussteuern andererseits aufgrund der Besonderheiten demonstrativen Konsums so gut wie unkalkulierbare Folgen mit sich bringen, erscheint die Besteuerung von Luxus- und Statusgütern als fragwürdiges Unterfangen.

The birth of the International Geophysical Year

In his essay “Six Cautionary Tales for Scientists,” Freeman Dyson warns against “the game of status seeking, organized around committees.” (Dyson, 1992). It is not that committees are the root of evil, he writes, but that when presented with a choice between incremental, practical solutions and grand schemes that attract attention, committees have every incentive to choose the latter—even if the choice has a high probability of failure. Often the committees present the grand scheme as the only choice, an all-or-nothing proposition.