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Spontaneous Discrimination

  • Balazs Szentes

    (London School of Economics)

  • Marcin PÄ™ski

    (University of Toronto)

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    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.

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    File URL: http://econresearch.uchicago.edu/sites/econresearch.uchicago.edu/files/BFI_2012-005.pdf
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    Paper provided by Becker Friedman Institute for Research In Economics in its series Working Papers with number 2012-005.

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    Date of creation: 2012
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    Handle: RePEc:bfi:wpaper:2012-005
    Contact details of provider: Web page: http://bfi.uchicago.edu/
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    1. David Austen-Smith & Roland G. Fryer, 2005. "An Economic Analysis of "Acting White"," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 551-583, May.
    2. Drew Fudenberg & David K. Levine, 1996. "The Theory of Learning in Games," Levine's Working Paper Archive 624, David K. Levine.
    3. Michi Kandori, 2010. "Social Norms and Community Enforcement," Levine's Working Paper Archive 630, David K. Levine.
    4. Rosen, Asa, 1997. "An equilibrium search-matching model of discrimination," European Economic Review, Elsevier, vol. 41(8), pages 1589-1613, August.
    5. Jan Eeckhout, 2006. "Minorities and Endogenous Segregation," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 31-53.
    6. 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).
    7. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
    8. 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.
    9. Hanming Fang & Andrea Moro, 2010. "Theories of Statistical Discrimination and Affirmative Action: A Survey," NBER Working Papers 15860, National Bureau of Economic Research, Inc.
    10. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
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