This paper considers a dynamic economy in which agents are repeatedly matched with one another and decide whether to enter into profitable partnerships. Each agent has a physical colour and a social colour. The social colour of an agent acts as a signal about the physical colour of agents in his partnership history. Before an agent makes a decision, he observes his match's physical and social colours. Neither the physical colour nor the social colour is payoff-relevant. We identify environments where, in some equilibria, agents condition their decisions on the physical and social colours of their potential partners. That is, they discriminate. The main result of the paper is that, in these aforementioned environments, every stable equilibrium must involve discrimination. In particular, the colour-blind equilibrium is unstable.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
- Mariagiovanna Baccara & Leeat Yariv, 2008.
"Similarity and Polarization in Groups,"
08-27, New York University, Leonard N. Stern School of Business, Department of Economics.
- Baccara, Mariagiovanna & Yariv, Leeat, 2010. "Similarity and polarization in groups," Discussion Papers, Research Unit: Market Behavior SP II 2010-20, Social Science Research Center Berlin (WZB).
- Rosen, Asa, 1997. "An equilibrium search-matching model of discrimination," European Economic Review, Elsevier, vol. 41(8), pages 1589-1613, August.
- A Rosen, 1992. "An Equilibrium Search-Matching Model of Discrimination," CEP Discussion Papers dp0097, Centre for Economic Performance, LSE.
- David Austen-Smith & Roland G. Fryer, 2005. "An Economic Analysis of "Acting White"," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 551-583.
- Hanming Fang & Andrea Moro, 2010. "Theories of Statistical Discrimination and Affirmative Action: A Survey," NBER Working Papers 15860, National Bureau of Economic Research, Inc.
- David Austen-Smith & Ronald G. Fryer, 2005. "An Economic Analysis of 'Acting White'," Discussion Papers 1399, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, September.
- Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
- Drew Fudenberg & David K. Levine, 1998. "The Theory of Learning in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061945, July.
- Drew Fudenberg & David K. Levine, 1996. "The Theory of Learning in Games," Levine's Working Paper Archive 624, David K. Levine.
- Jan Eeckhout, 2006. "Minorities and Endogenous Segregation," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 31-53. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:bfi:wpaper:2012-005. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Toni Shears)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.