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Group identity in markets

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  • Li, Sherry Xin
  • Dogan, Kutsal
  • Haruvy, Ernan

Abstract

We present a laboratory experiment that measures the effects of group identity--one's perceived membership in social groups--on market transactions in an oligopoly market with a few sellers and buyers. We artificially induce group identity using art preferences and college majors in different treatments, respectively. Subjects are randomly assigned into the roles of buyers and sellers and interact repeatedly. We find that the presence of groups influences both the selection of trading partners and the determination of prices. All else equal, sellers are more likely to make offers to ingroup buyers, and the buyers are more likely to accept offers from ingroup sellers. There are considerable intergroup price differentials with the outgroup sellers charging a lower price than the ingroup sellers.

Suggested Citation

  • Li, Sherry Xin & Dogan, Kutsal & Haruvy, Ernan, 2011. "Group identity in markets," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 104-115, January.
    • Handle: RePEc:eee:indorg:v:29:y:2011:i:1:p:104-115
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    3. Herbst, Luisa & Konrad, Kai A. & Morath, Florian, 2015. "Endogenous group formation in experimental contests," European Economic Review, Elsevier, vol. 74(C), pages 163-189.
    4. Bao, Te & Liang, Bin & Pei, Jiaoying, 2022. "Does ethnic diversity always undermine pro-social behavior? Evidence from a laboratory experiment," European Journal of Political Economy, Elsevier, vol. 72(C).
    5. Sang-Hyun Kim & Fernanda L Lopez de Leon, 2019. "In-group and out-group biases in the marketplace: a field experiment during the World Cup," Oxford Economic Papers, Oxford University Press, vol. 71(3), pages 528-547.
    6. List, John A. & Neilson, William S. & Price, Michael K., 2016. "The effects of group composition in a strategic environment: Evidence from a field experiment," European Economic Review, Elsevier, vol. 90(C), pages 67-85.
    7. Dominique Cappelletti & Luigi Mittone & Matteo Ploner, 2015. "Language and intergroup discrimination. Evidence from an experiment," CEEL Working Papers 1504, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    8. Ockenfels, Axel & Werner, Peter, 2014. "Beliefs and ingroup favoritism," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 453-462.
    9. Wladislaw Mill & John Morgan, 2022. "The cost of a divided America: an experimental study into destructive behavior," Experimental Economics, Springer;Economic Science Association, vol. 25(3), pages 974-1001, June.
    10. Le Coq, Chloé & Tremewan, James & Wagner, Alexander K., 2015. "On the effects of group identity in strategic environments," European Economic Review, Elsevier, vol. 76(C), pages 239-252.
    11. Daniel John Zizzo, 2012. "Inducing natural group identity: A RDP analysis," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 12-01, School of Economics, University of East Anglia, Norwich, UK..
    12. Horstmann, Elaine & Blankenberg, Ann-Kathrin & Schneider, Tim, 2017. "Cooperation in public goods games: Enhancing effects of group identity and competition," University of Göttingen Working Papers in Economics 324, University of Goettingen, Department of Economics.
    13. Chang, Daphne & Chen, Roy & Krupka, Erin, 2019. "Rhetoric matters: A social norms explanation for the anomaly of framing," Games and Economic Behavior, Elsevier, vol. 116(C), pages 158-178.
    14. 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.
    15. Mill, Wladislaw & Morgan, John, 2022. "Competition between friends and foes," European Economic Review, Elsevier, vol. 147(C).
    16. Tom Lane, 2023. "The strategic use of social identity," Discussion Papers 2023-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    17. Ibanez, Marcela & Schaffland, Elke, 2018. "Organizational performance with in-group and out-group leaders: An experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 73(C), pages 1-10.

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