SOCIAL STATUS AND THE DESIGN OF OPTIMAL BADGES

Many websites rely on user-generated content to provide value to consumers. Often these websites incentivize user-generated content by awarding users badges based on their contributions. These badges confer value upon users as a symbol of social status. In this paper, we study the optimal design of a system of badges for a designer whose goal is to maximize contributions. We assume users have heterogeneous abilities drawn from a common prior and choose how much effort to exert towards a given task. A user’s ability and choice of effort determines the level of contribution he makes to the site. A user earns a badge if his contribution surpasses a pre-specified threshold. The problem facing the designer then is how to set badge thresholds to incentivize contributions from users. Our main result is that the optimal total contribution can be well-approximated with a small number of badges. Specifically, if status is a concave function of the number of players with lower rank, then a single badge mechanism that divides players in two status classes suffices to yield a constant approximation, whilst for more general functions we show that typically logarithmic, in the number of players, badges suffice. We also show that badge mechanisms with a small number of badges have nice structural stability properties for sufficiently large number of players.