Organizing Contests for Status: The Matthew Effect Versus the Mark Effect
Management Science, Forthcoming
49 Pages Posted: 22 Jul 2010
Date Written: July 21, 2010
What is the best way to design tournaments for status, where individuals labor primarily for the esteem of their peers? What process, in other words, should organizers of status-based contests impose upon those who covet peer recognition? We propose a formal model of status-based competition that contrasts two competing alternatives. The first, following Merton (1968), is the "Matthew Effect," according to which a tournament’s architect directs slack resources to elite actors, and thus widens the distribution of rewards by favoring cumulative advantage. The second is the "Mark Effect," under which a tournament’s designer instead pushes slack resources to marginal actors, and thus tightens the distribution of rewards. Our results suggest that although the Mark Effect is better for the social welfare of most tournaments, the Matthew Effect is preferable in two distinct contexts: in small tournaments where variation in underlying ability translates into acute cost advantages for the most capable contestants; and in large tournaments whose contestants face constant, rather than rising, marginal costs. Our contributions are twofold: We find, counter to the thrust of Merton’s (1968) work, that cumulative advantage is not invariably optimal for the functioning of status contests; and we identify circumstances in which the production of superstars is likely to make contests for status better off in aggregate. Implications for future research on status and management are discussed.
Keywords: Status, Matthew Effect, Tournaments, Resource Allocation
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