Overpayment and the Prism: Efforts to Relieve Pressure from Prestige

Abstract

This is a paper about the economic costs that high status actors may accrue in market transactions. High status actors will have status anxiety because they need to carefully manage the perception of the audience in order to maintain their privileges. Thus, to positively influence the audiences perception, high status actors may engage in economically costly efforts, such as overpayment. They are more likely to engage in such behavior when there are no other costless ways relieve status anxiety and when the effort is particularly effective in alleviating the anxiety. In sum, this paper seeks to answer the following research questions: Do high status actors incur significant economic costs because of their social prestige? What conditions make it likely for them to do so? For analysis, the paper uses the panel data of teams in the English Premier League. The panel dataset was built from 1,415 individual player transactions on Transfermkt.com across the 11 most recent seasons. It finds that high status teams are more likely to purposely overpay for the acquisition of new players, especially for younger ones and in the summer transfer window. Thus, actors manage their status, not only by affiliating with high status others, but also by purposefully engaging in a specific type of costly economic exchange—overpayment.