Status in Markets

This project tests for the effect of social status in a laboratory experimental market. We consider a special “box design” market in which a vertical overlap in supply and demand ensure that there are multiple equilibrium prices. We manipulate the relative social status of our subjects by awarding high status to a subset of the group based one of two procedures. In the first, a subject’s score on a trivia quiz determines his or her status; in another, subjects are assigned randomly to a higher-status or lower-status group. In both treatments we find that average prices are higher in markets where higher-status sellers face lowerstatus buyers, and lower when buyers have higher status than sellers. Across all sessions, the higher-status side of the market captures a greater share of the surplus, earning significantly more than their lowerstatus counterparts. *This research is supported by the National Science Foundation, SBR#94-22867, and by a Virginia Tech, College of Arts and Sciences Pilot Project Grant. A portion of the research was conducted at the Economic Science Laboratory at the University of Arizona, where Eckel was supported by a Gilder Foundation Fellowship. We thank Larry Blume, Ernst Fehr, Robert Frank, Elizabeth Hoffman, Charles Plott, Vernon Smith, James Walker, three referees and the editors of this journal, whose comments greatly improved the paper. We dedicate this paper to the memory of Elaine Bennett, our friend and colleague, who participated in the research at its inception.