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Favoritism

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Author Info
Bramoullé, Y.
Goyal, S.

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Abstract

Favoritism is the act of offering jobs, contracts and resources to members of one’s social group in preference to outsiders. Favoritism is widely practiced and this motivates an exploration of its origins and economic consequences. Our main finding is that individuals have an interest to trade favors over time and that this will come at the expense of others, who are outside their group. We show that favoritism is relatively easier to sustain in smaller groups. Favoritism entails social costs as it usually leads to inefficient allocations. However, favoritism can lead to payoff advantages for larger groups. Productivity enhancing investments are larger in groups which practice favoritism. The availability of investment opportunities can reinforce payoff inequalities across groups.

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File URL: http://www.econ.cam.ac.uk/dae/repec/cam/pdf/cwpe0942.pdf
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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0942.

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Date of creation: 12 Oct 2009
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Handle: RePEc:cam:camdae:0942

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Keywords: Herding;

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  10. Prendergast, Canice & Topel, Robert H, 1996. "Favoritism in Organizations," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 958-78, October. [Downloadable!] (restricted)
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