Competing for Happiness: Attitudes to Competition, Positional Concerns and Wellbeing

In this paper we focus on market competition, where sellers compete with each other to maximize profits or market shares. More in general, market competition implies that economic agents engage in production and/or trade to maximize their objective functions (i.e. profits for firms, utility for consumers). We acknowledge that the concept of competition may be used in several other fields and with different meanings. In sports, for example, people may also compete for fun or to show their abilities, rather than to win the competition and the final prize.

In this paper the terms “happiness”, “well-being” and “life satisfaction” are used interchangeably. In the empirical analysis we actually measure life satisfaction on the basis of the answers to the following question: “Using a scale from 1 to 10 (where 1 means not at all satisfied, 10 means completely satisfied), please rate, all things considered, how satisfied you are with your life as a whole these days”.

Negative externalities occur when someone’s behavior has a detrimental effect on a third party. In this case, the relative improvement in someone’s position causes a reduction in the utility of the others.

Economics is taken by students graduating in either economics or management. Sociology is taken by students graduating in either education science or psychology. Therefore, in our survey we interviewed students from four different curricula. Furthermore, given the number of potential attending students, in Spring 2012 there were three introductory economics courses, with the same program but taught by different instructors. First-year students were randomly assigned to one of these courses on the basis of the initial letter of their last name. Only one sociology course was offered in Spring 2012. None of the first-year students taking economics (sociology) could take sociology (economics) before or at the time of the survey.

In the survey we indicated that prices were the same in states A and B.

An important feature of these questions is that they are purely hypothetical, rather than referring to actual behavior. The use of hypothetical questions may raise criticisms because the subjects might behave differently if they actually were in the hypothetical situation and, therefore, the answers given to our survey would not be reliable. Nonetheless, in the literature there is considerable agreement on the use of hypothetical questions in surveys (Solnick and Hemenway 1998). Hypothetical questions have been recently used also in large-scale surveys, such as the 2012 Programme for International Student Assessment (PISA) of the OECD (see Annex 6 in OECD 2013).

180 students (45% of the sample) filled out the version with the positional case presented first; 217 students (54% of the sample) filled out the version with the absolute case presented first. We did not find any statistically significant difference in the share of students choosing the positional case by version of the survey.

The translation of the whole questionnaire is reported in Appendix 2.

These statements are taken from the World Value Survey, where they are used with a corresponding opposite statement at the two extremes of a 10-point scale. Individuals are asked to position themselves on the scale according to whether they agree more with the sentence on the left (corresponding to 1) or with the sentence on the right (corresponding to 10). In the World Value Survey questionnaire, the first statement that we used (“Competition is good, it stimulates people to work hard and develop new ideas”) is the sentence on the left, while the opposite statement on the right is “Competition is harmful. It brings out the worst in people’’. This is the question used also in Barrios (2015) to identify different attitudes to competition. The second sentence that we used (“You can become rich only by damaging someone else”) was the statement on the left, while the opposite statement on the right was “Wealth can grow so there’s enough for everyone”. In order to simplify the questionnaire and reduce uncertainty in the answers, also given that our respondents were young students, we preferred to present only one statement at a time and ask the respondents whether or not they agreed with that statement using a 10-point scale.

In Sect. 5 we report the results of a sensitivity analysis based on alternative definitions of these variables.

The answers to the two statements were actually not statistically correlated (the correlation index was 0.036), suggesting that they capture different aspects of competition and their joint use should provide a more precise classification of individuals according to how they perceive competition.

Also these questions are a simplified version of standard questions from the World Value Survey, in which individuals have to position themselves on a scale that ranges from 1 to 10 between two opposite statements.

Notice that participants to our survey were first year students. Hence, the learning effect may be less relevant than self-selection based on individual characteristics.

For detailed definitions and basic descriptive statistics see Table 7 in Appendix 1.

The dependent variable was based on a 10-point scale and hence took integer values from 1 to 10. We also performed ordered probit estimates and Pseudo-OLS (POLS) estimates based on the linearized version of the dependent variables (Van Praag and Ferrer-i-Carbonell 2006). The main results were qualitatively unchanged and are available upon request.

This is evident in cross-country comparisons of statistics on happiness, which always rank Nordic countries highest and Mediterranean nations lowest regardless of the aspect of life considered (work, health, family, overall life) and of objective conditions (Easterlin 2001; Layard 2005). This is because people in different countries perceive subjective questions differently, also in light of quite different historical, cultural or religious backgrounds. A similar problem, albeit of lower intensity, may arise when comparing relatively homogeneous individuals (such as students in our case) within a country.

The estimated marginal effect for the variable Score is positive and statistically significant, suggesting that individuals who are overall more positional are positional also on income.

In our case, this result may be also due to the rather homogeneous sample—first-year undergraduate students—used in the empirical analysis. Note also that the estimated coefficients for the individual controls were not statistically significant also when we did not control for attitude to competition. Results are available upon request.

We tested the multicollinearity issue using the VIF—variation inflation factor—test. The value of this test in the last specification of Table 3 is 1.20.

Estimates of the first stage and complete estimates of the second stage are available upon request. Furthermore, in the case of happiness we also used as additional instruments students’ opinions on some general statements related to income inequality, government intervention and the determinants of success. The opinion on these general matters should be correlated with the opinion on competition, but it should influence happiness only through its effect on attitude to competition. These estimates are similar to those presented in Table 5 and are available upon request.

The values of VIF test in specification (6) and in specification (8) were respectively 1.15 and 1.20, confirming the absence of multicollinearity.