Experimental Evidence for Status-Seeking Through Debt Accumulation, Poster 53

Through conducting a lab experiment, I am hoping to better understand people’s willingness to accumulate debt to obtain status. I have designed a tournament in which participants will have the opportunity to invest (and... [ view full abstract ]

Through conducting a lab experiment, I am hoping to better understand people’s willingness to accumulate debt to obtain status. I have designed a tournament in which participants will have the opportunity to invest (and potentially go into debt) to achieve status. Financial crises are triggered by high private debt and rapid private debt growth. The 2008 recession was caused by rapid accumulation of high mortgage debt. Homes are the ultimate symbol of status and thus this over consumption of homes in crucial to understand what motivates people to spend beyond their means and whether status plays a role. In my experiment, the treatment session will conclude with an award ceremony for the player with the highest score while the control session will conclude will conclude with individual private payment. After completing a real-effort task the participants will have the opportunity to invest (and potentially go into debt) to avoid a possibility of their score being reduced. The person with the highest score of their group will be awarded with status according to their treatment. All participants will compensated with money based on their performance to a randomly selected round of the tournament.