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American Economic Review: Vol. 103 No. 6 (October 2013)

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Spontaneous Discrimination

Article Citation

Pęski, Marcin, and Balázs Szentes. 2013. "Spontaneous Discrimination." American Economic Review, 103(6): 2412-36.

DOI: 10.1257/aer.103.6.2412

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.

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Authors

Pęski, Marcin (U Toronto)
Szentes, Balázs (London School of Economics and Political Science)

JEL Classifications

C78: Bargaining Theory; Matching Theory
D82: Asymmetric and Private Information; Mechanism Design
J15: Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
J71: Labor Discrimination
Z13: Economic Sociology; Economic Anthropology; Social and Economic Stratification


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