Stratified Reward Structures and Competition in Markets for Creative Production

Stratified reward structures have emerged as a universal feature of modern society, but their implications on the producers and consumers of creative work are not fully understood. We conducted an online experiment to test the effects of reward stratification in peer-reviewed creative production markets. We find that competition induced by stratification shapes the evolution of creative production, and that the quality of each tier in a stratified market is consistent with its position in the hierarchy. The top tier maintains high-quality standards by attracting many submissions and by filtering its output, operating as an effective sorting device for budget-constrained consumers. However, stratification generates higher levels of inequality among producers, leading to higher rates of market-exit for those lagging behind. We discuss the broad implications of reward stratification and artificial scarcity in hypercompetitive environments, contributing to the debate on cumulative advantage and the allocation of funding and recognition in science.