Spontaneous Discrimination
American Economic Review · 2013 · Volume 103 · Issue 6
Abstract
We consider a dynamic economy in which agents are repeatedly matched and decide whether or not to form profitable partnerships. Each agent has a physical color and a social color. An agent's social color acts as a signal, conveying information about the physical color of agents in his partnership history. Before an agent makes a decision, he observes his match's physical and social colors. Neither the physical color nor the social color is payoff relevant. We identify environments where equilibria arise in which agents condition their decisions on the physical and social colors of their potential partners. That is, they discriminate.
Keywords
Bargaining Theory, Matching Theory, Asymmetric and Private Information, Mechanism Design, Economics of Minorities, Races, Indigenous Peoples, and Immigrants, Non-labor Discrimination, Labor Discrimination, Economic Sociology, Economic Anthropology, Social and Economic Stratification
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