Experimental Design
In the experiment, individuals interact with each other within a group of 5 persons. The experiment lasts for 40 rounds and partner matching is used to keep group members unchanged throughout the whole experiment.
In each round, each individual needs to choose an effort level and initiate links to some or all of the other 4 group members to construct their network neighbors. We assume links are formed unilaterally and costly. Moreover, individuals have a linear-quadratic utility function (Hiller, 2017). The payoff function is shown below:
Pi_i=a*x_i-b/2*x_i^2+lambda*x_i \sum(x_j)-k*n^out_i
where a, b and lambda are parameters, k is the cost of initiating a link, x_i is the effort choice of i, n^out_i is the number of links initiated by i and the summation represents the total effort choices over the neighbors of i. Accordingly, individual’s payoff is positively affected by total effort chosen by his/her network neighbors.
At the end of each round, participants receive feedback on their choices, payoffs, and network formed in the group, as well as the effort levels of other group members. For a typical treatment, additional information on status is provided in the feedback as well. The final earning of the experiment for each individual is the sum of his/her payoffs over all the 40 rounds.
In the treatments, we introduce two types of status competition: 1. individuals receive monetary status benefits when receiving links from other group members, i.e., adding an additional item (m*n^in_i) on the right-hand side of individual’s payoff function Pi_i, denoted by Treatment S(tatus); 2. individuals are provided information on relative position within the group in terms of payoffs in the feedback at the end of each round, denoted by Treatment R(anking). Treatment I(teraction) investigates the combined impact of the interaction and the treatment with no status manipulation is denoted by Baseline.
We study the impact of different ways of status competition on individual’s effort and linking choices, payoffs, efficiency, and network structure formed. Moreover, we are going to investigate the combined effect of these two settings of status competition.
In the experiment, we set a=10, b=4, lambda=0.4, k=3.9, and m=6. At the end of the experiment, participants fill out a short questionnaire about their demographics, cognitive reflection test, and risk-preferences.
The experiment is conducted in the Experimental Economics Lab at International Business School Suzhou, Xi’an jiaotong-Liverpool University with participants recruited on the Online Recruitment System for Economic Experiments (ORSEE) using the o-Tree software.
References
Charness, G., Masclet, D., & Villeval, M. C. (2014). The dark side of competition for status. Management Science, 60(1), 38-55.
Hiller, T. (2017). Peer effects in endogenous networks. Games and Economic Behavior, 105, 349-367.
van Leeuwen, B., Offerman, T., & Schram, A. (2020). Competition for status creates superstars: An experiment on public good provision and network formation. Journal of the European Economic Association, 18(2), 666-707.