Effects of wealth on the intensity of competition: Evidence from a lab experiment

Abstract

Competition is a primary form of human social interaction and also serves as a distribution mechanism. Wealth determines the amount of resources that competition participants can invest and is a crucial factor influencing competitive input. To date, the effects of wealth growth on competition intensity remain unclear. To clarify the effects of wealth growth among competition participants on competitive behavior, we employ a between-group design to study how individuals with different initial wealth levels compete. We find that when initial wealth is equal, the relationship between wealth growth and competitive input is monotonically increasing. When initial wealth is unequal, unilateral wealth growth has different effects on the poor and the rich. When the wealth of the rich increases and the wealth gap widens, the competitive input from both sides does not change significantly. However, when the wealth of the poor increases and the wealth gap narrows, competitive input from both sides increases significantly, intensifying competition; this results in negative net income for both sides and leads to substantial social losses. These behaviors are propelled by the combined influences of wealth expansion and the widening wealth disparity. Wealth growth significantly impacts individual bidding, while the wealth disparity has a negative effect on the bidding of the poor. The conclusions of this paper may help to explain the phenomenon of intensified social competition as the wealth disparity increases.