In many social situations, economic agents are concerned about their relative standing compared with others. One typical example is conspicuous consumption, whereby individuals compete for relative position in a society by spending on visible, status-signaling goods (e.g., expensive cars, gifts, branded haute couture). However, positional concerns extend beyond conspicuous consumption to any social situation in which rewards are allocated based on relative positions. These include all-pay auctions, an arms race between countries, rank-order tournaments and investment in rent-seeking.

One common aspect of the literature on positional concerns is that both the theoretical and the empirical works assume that individuals make comparisons relative to everybody else in their society or in a larger group to which they belong (e.g., village, neighborhood, age, or income group). However, a growing body of economic literature on social networks has demonstrated that individuals interact with a smaller set of social contacts, and the structure of social connections has a significant impact on the individual outcomes. In this regard, a theoretical contribution by Ghiglino and Goyal (2010) found that individuals’ consumption of positional goods is determined by the Katz-Bonacich centrality of their position in the social network. Moreover, the overall network structure, especially the number of links, also affects individual choices.

We designed an experimental game based on the theoretical contribution of Ghiglino and Goyal (2010) in which individuals are embedded in a network of four individuals, and allocated a fixed endowment between a private and a positional good for 30 consecutive rounds. Our study is centered around four main research questions.

The first question studied whether individuals exhibit positional concerns in social networks or choose more efficient allocations. The second research question aimes to uncover the relationship between the centrality of an individual’s network position and the individual’s consumption choices and utility. The third question studies the impact of the overall network structure, in particular, the number of links, on the consumption choices and welfare. The aim of the fourth question is to understand the learning process in the game. In particular, if the game play converges to the Nash equilibrium, how do the individuals learn to play the Nash equilibrium given that the game is relatively complex?