Liability of High Status: Overpayment to Relieve Status Anxiety in the English Premier League

Extant literature on status has emphasized the benefits of high status for organizations. This paper, however, explores the economic costs that high status actors may accrue in market transactions. We hypothesize that high status actors are likely to engage in economically costly efforts, such as overpayment in acquiring resources that critically influence their image to relieve their status anxiety. We also hypothesize that they are more likely to engage in such behavior when there are no other efficient ways to relieve the status anxiety and when such behavior is particularly effective in alleviating the anxiety. Empirical analysis with the panel data of the English Premier League teams provides strong supports for the hypotheses. It finds that high status teams are more likely to purposely overpay for the acquisition of players, especially for younger ones and in the summer transfer windows. Based on the results, we discuss theoretical implications, limitations, and future research directions.