Development of a Theory of Status in Economic Decision Making

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People value status and often seek it as a reward for their efforts in work and elsewhere. Status is defined as high rank on some dimension that is held by society to be important. The sources of status can be separated into two main categories: those which are earned and those which are unearned. College graduates, for example, hold "earned" status relative to high school dropouts while hereditary rank represents an example of "unearned" status. Status is an inherently social phenomenon but one which is full of economic ramifications. Social psychologists understand that status affects the way people treat each other. Their work shows that, for example, people will discriminate in favor od people who have a status level similar to their own, and against those with lower status. Economists look at these questions from a different angle. What economists want to know about status is whether people are willing to continue to discriminate when discrimination costs money. Economists also want to know whether status is valuable enough to pay for it, and if so, how much people are willing to pay. These questions form the objectives in this pilot effort. The research explores the economic basis for the value of status by creating status in an experimental economic environment, for example, an experimental market. Analysis of these experiments will compare subjects' decisions based on whether they or their opponents had high or low status. This research will aid in understanding the ways in which status changes decision making and in the ways status can be used to reward work efforts.