Measuring Welfare and Spillover Effects of Rank Information

Abstract

Rank information is often provided to improve task performance, yet its welfare and spillover effects have rarely been measured. To measure these effects, we conducted a controlled laboratory experiment, in which participants completed a simple cognitive task and reported their willingness-to-pay (WTP) to receive or avoid rank information both provided privately and publicly via partial or
full announcement, both unconditionally and conditional on realized rankings. The unconditional and conditional WTP data allow us to utilize the methodology developed by Allcott and Kessler (2019) and Butera et al. (2022), respectively, to estimate in money metric the welfare changes caused by different schemes of rank information provision in total utility and in image utility alone. We find that for our whole sample, using either approach, the total net utility change is positive for both privately communicated rank information and partial announcement, but negative for full announcement. In contrast, the estimated net image utility change derived from the structural estimation, as in Butera et al. (2022), is positive for all of the three information feedback schemes. However, examining either total utility or image utility alone, there is always a non-negligible subgroup of subjects who bear welfare losses. Moreover, we do not find much negative spillover effect of rank information provision on cooperation, coordination and conflict avoidance in subsequent games.

Keywords: ranking information, welfare evaluation, spillover effect, social recognition, social comparison

JEL Classification: D61, C91, D91