Group Identity and Social Preferences by Yan Chen and Sherry X. Li

Beyond a summary of the paper, this review of "Group Identity and Social Preferences" by Yan Chen and Sherry X. Li highlights its exceptional impact on our understanding of group-contingent social preferences. This paper has made an important theoretical contribution by introducing group identity in the Charness and Rabin (2002)'s model of social preferences. The core of the contribution is to show experimentally that social identity influences distributional preferences, reciprocity and welfare-maximizing behavior. In particular, charity increases and envy decreases when people are matched with an in-group compared to an out-group, and people are more likely to reward and less likely to punish an ingroup than an out-group match. This paper has also contributed to the methodological debates about the use of minimal group identity in laboratory experiments. It has inspired many research programs on the role of group-contingent preferences in various dimensions of decision-making in society. It is also important to emphasize its policy implications regarding how groupcontingent social preferences could be activated to improve efficiency and the quality of social interactions in our segmented societies. This research agenda is more relevant than ever.