CONTESTS FOR STATUS

Benny Moldovanu (), Aner Sela and Xianwen Shi

No 604, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: We study the optimal design of organizations under the assumption that agents in a contest care about their relative position. A judicious de?nition of status categories can be used by a principal in order to in?uence 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 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 (IFR), a proliferation of status classes is optimal, while the optimal partition involves some coarseness in other cases. Moreover, for IFR distributions, a coarse partition with only two status categories achieves at least half of the output obtained in the optimal partition with a proliferation of classes. 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.

Pages: 25 pages
Date: 2006
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Related works:
Journal Article: Contests for Status (2007)
Working Paper: Contests for Status (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:bgu:wpaper:0604

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