Concern for relative position, rank-order contests, and contributions to public goods

We study the consequences of concern for relative position and status in a public good economy. We consider a group of agents who are engaged in a contest for position whereby a set of rewards are distributed according to relative status. The extent of concern for rewards, together with the relative magnitude of rewards, will have an impact on agents’ willingness to contribute to public goods. Depending on the nature of prizes, i.e. whether higher private good consumption is rewarded or punished, the contest for relative position will either exacerbate or ameliorate the free-riding problem inherent in public good environments. In addition to examining the implications of concern for relative position, we also consider how an appropriate scheme of rewards might be designed to induce more efficient levels of public good.