On the Origin and Persistence of Identity-Driven Choice Behavior

Recent literature shows how a priori identical individuals belonging to different social groups make different choices. This paper proposes a novel explanation for this identity-driven choice behavior. Agents choose whether to undertake a task with a probability of success driven by an ability. They have a noisy perception of this ability and observe social cues that stem from the prevalence of their subgroup among the successful individuals. Although the noise in their perception is unbiased, it has an asymmetric effect on expected utility. This makes it optimal for certain agents to bias their noisy perception with social cues, even when these cues are irrelevant in a Bayesian sense. I show the existence of a stable population equilibrium in which both task allocation and the use of social cues differ between a priori identical subgroups.