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Identity, homophily and in-group bias

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  • Currarini, Sergio
  • Mengel, Friederike

Abstract

Many instances of social interaction display either or both of the following well-documented phenomena. People tend to interact with similar others (homophily). They also tend to treat others of shared social identity more favorably (in-group bias). While both phenomena involve some degree of discrimination towards others, a systematic study of their relations and interplay is yet missing. In this paper we report the findings of an experiment designed to address this issue. Participants are exogenously and randomly assigned to one of two groups. Subsequently they play a sequence of eight games with either an in-group or an out-group member. In treatment EXO in- and out-group matches are formed exogenously, while in ENDO participants can choose between in- and out-group matches. We find strong evidence of in-group bias in EXO, and strong evidence of homophily in ENDO. In-group biases, however, either decrease or disappear altogether under endogenous matching. We show that self-selection of homophilous agents into in-group matches cannot explain this fact. We also find that homophily is strongly correlated with risk aversion, and we build on this evidence to derive a rationale for both the existence of homophily and the disappearance of in-group biases under endogenous matching.

Suggested Citation

  • Currarini, Sergio & Mengel, Friederike, 2016. "Identity, homophily and in-group bias," European Economic Review, Elsevier, vol. 90(C), pages 40-55.
  • Handle: RePEc:eee:eecrev:v:90:y:2016:i:c:p:40-55
    DOI: 10.1016/j.euroecorev.2016.02.015
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    4. David Hugh-Jones & Martin Alois Leroch, 2017. "Intergroup Revenge: A Laboratory Experiment," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(2), pages 117-135, November.
    5. Dickinson, David L. & Masclet, David & Peterle, Emmanuel, 2018. "Discrimination as favoritism: The private benefits and social costs of in-group favoritism in an experimental labor market," European Economic Review, Elsevier, vol. 104(C), pages 220-236.
    6. Florian Hett & Markus Kröll & Mario Mechtel, 2019. "Choosing Who You Are: The Structure and Behavioral Effects of Revealed Identification Preferences," Working Papers 1903, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    7. Cochard, François & Flage, Alexandre & Peterle, Emmanuel, 2019. "Intermediation and discrimination in an investment game: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 196-208.
    8. Hakobyana, Zaruhi & Koulovatianos, Christos, 2019. "Populism and polarization in social media without fake news: The vicious circle of biases, beliefs and network homophily," CFS Working Paper Series 626, Center for Financial Studies (CFS).
    9. Hett, Florian & Kröll, Markus & Mechtel, Mario, 2017. "Choosing Who You Are: The Structure and Behavioral Effects of Revealed Identification Preferences," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168223, Verein für Socialpolitik / German Economic Association.
    10. Xu, Xue & Potters, Jan & Suetens, Sigrid, 2020. "Cooperative versus competitive interactions and in-group bias," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 69-79.
    11. Bicskei, Marianna & Lankau, Matthias & Bizer, Kilian, 2014. "Social environment and forms of governance: Monetary and non-monetary punishment and the role of emotions," Center for European, Governance and Economic Development Research Discussion Papers 202, University of Goettingen, Department of Economics.
    12. Xu, Xue, 2018. "Experiments on cooperation, institutions, and social preferences," Other publications TiSEM d3cf4dba-b0f3-4643-a267-7, Tilburg University, School of Economics and Management.
    13. Fabian Winter & Mitesh Kataria, 2020. "You are who your friends are?," Rationality and Society, , vol. 32(2), pages 223-251, May.
    14. Andrea F. M. Martinangeli, 2017. "Do What (You Think) the Rich Will Do: Inequality and Belief Heterogeneity in Public Good Provision," Working Papers tax-mpg-rps-2017-06_4, Max Planck Institute for Tax Law and Public Finance.
    15. Xu, Hedong & Fan, Suohai & Tian, Cunzhi & Xiao, Xinrong, 2019. "Effect of strategy-assortativity on investor sharing games in the market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 514(C), pages 211-225.
    16. Kets, Willemien & Sandroni, Alvaro, 2019. "A belief-based theory of homophily," Games and Economic Behavior, Elsevier, vol. 115(C), pages 410-435.
    17. Artavia-Mora, Luis & Bedi, Arjun S. & Rieger, Matthias, 2018. "Help, Prejudice and Headscarves," IZA Discussion Papers 11460, Institute of Labor Economics (IZA).
    18. Bauer, Kevin, 2020. "How did we do? The impact of relative performance feedback on intergroup hostilities," SAFE Working Paper Series 281, Leibniz Institute for Financial Research SAFE.
    19. Tom Lane, 2015. "Discrimination in the laboratory: a meta-analysis," Discussion Papers 2015-03, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    20. Bilancini, Ennio & Boncinelli, Leonardo & Wu, Jiabin, 2018. "The interplay of cultural intolerance and action-assortativity for the emergence of cooperation and homophily," European Economic Review, Elsevier, vol. 102(C), pages 1-18.

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    More about this item

    Keywords

    In-group bias; Homophily; Endogenous matching; Experiments; Discrimination;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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