Competition for Status Creates Superstars: An Experiment on Public Good Provision and Network Formation

Abstract

We investigate a mechanism that facilitates the provision of public goods in a network formation game. We show how competition for status encourages a core player to realize efficiency gains for the entire group. In a laboratory experiment we systematically examine the effects of group size and status rents. The experimental results provide very clear support for a competition for status dynamic that predicts when, and if so which, repeated game equilibrium is reached. Two control treatments allow us to reject the possibility that the supergame effects we observe are driven by social preferences.

Keywords: Network formation, public goods, competition, status

JEL Classification: C91, D85, H41