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Discrimination as favoritism: The private benefits and social costs of in-group favoritism in an experimental labor market
TL;DR: In this paper, the authors examine labor market favoritism in a unique laboratory experiment design that can shed light on both the private benefits and spillover costs of employer favoritism (or discrimination) and identify one potential micro-foundation of societal unrest that may link back to labor market opportunity.
Abstract: In this paper, we examine labor market favoritism in a unique laboratory experiment design that can shed light on both the private benefits and spillover costs of employer favoritism (or discrimination). Group identity is induced on subjects such that each laboratory « society » consists of eight individuals each belonging to one of two different identity groups. In some treatments randomly assigned employer-subjects give preference rankings of potential worker-subjects who would make effort choices that impact employer payoffs. Though it is common knowledge that group identity in this environment provides no special productivity information and cannot facilitate communication or otherwise lower costs for the employer, employers preferentially rank in-group members. In such instances, the unemployed workers are aware that an intentional preference ranking resulted in their unemployment. Unemployed workers are allowed to destroy resources in a final stage of the game, which is a simple measure of the spillover effects of favoritism in our design. Though we find evidence that favoritism may privately benefit a firm in terms of higher worker effort, the spillover costs that result highlight a reason to combat favoritism/discrimination. This result also identifies one potential micro-foundation of societal unrest that may link back to labor market opportunity. Key Words: Discrimination, Experimental Economics, Social identity, Conflicts
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TL;DR: The results providing evidence for the enhanced attention toward out-group individuals after competition manipulation, as well as the motivation significance account of FRN, suggest perspective-taking may induce greater monitoring to opponent’s performance, which increases the win vs. loss differentiation brain response to the out-groups agent.
Abstract: Previous research has shown that people have more empathic responses to in-group members and more schadenfreude to out-group members. As a dimension of cognitive empathy, perspective-taking has been considered to be related to the enhancement of empathy. We tried to combine these effects through manipulation of a competitive task with opponents and an in-group partner and investigated the potential effect of in-group bias or the perspective-taking effect on outcome evaluation. We hypothesized that the neural activities would provide evidence of in-group bias. We tested it with a simple gambling observation task and recorded subjects' electroencephalographic (EEG) signals. Our results showed that the opponent's loss evoked larger feedback-related negativity (FRN) and smaller P300 activity than the partner's loss condition, and there was a win vs. loss differential effect in P300 for the opponent only. The principal component analysis (PCA) replicated the loss vs. win P300 effect to opponent's performance. Moreover, the correlation between the inclusion of the other in the self (IOS) scores and FRN suggests perspective-taking may induce greater monitoring to opponent's performance, which increases the win vs. loss differentiation brain response to the out-group agent. Our results thus provide evidence for the enhanced attention toward out-group individuals after competition manipulation, as well as the motivation significance account of FRN.
12 citations
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TL;DR: In this paper, the authors used a within-subjects laboratory design to study choices in the well-known (hypothetical) Trolley problem as well as in a real payoff money burning experiment that can inform our understanding of moral preferences and antisocial behavior.
Abstract: Anti-social behaviours are costly to organizations, and the ability to identify predictors of such behaviours can be valuable. In this paper, we used a within-subjects laboratory design to study choices in the well-known (hypothetical) Trolley problem as well as in a real payoff moneyburning experiment that can inform our understanding of moral preferences and antisocial behavior. Choices in both environments respond to incentives (i.e., the relative price of the ethical decision). Trolley problem decisions are consistent with previously known results— individuals prefer no action over action, and they prefer to avoid direct over indirect responsibility when negative consequences would be similar in either instance. In analyzing the determinants of anti-social money burning, our data identify money burning due to inequality aversion, but we also find evidence of pure nastiness (burning money of others to increase one’s advantageous inequality). Importantly, we find that willingness to commit ethically dubious acts in the Trolley problem significantly predicts money burning and, more specifically, nastiness. We conclude that choices in hypothetical environments can predict consequential and inefficient antisocial behaviours. Also, utilitarian behaviour in the Trolley dilemma is not linked to antisocial money burning, which contrasts with conclusions in the literature. Key Words: experiments, money burning, ethical dilemmas, anti-social behavioral, trolley problem
10 citations
TL;DR: In this paper, the antecedents of antisocial behavior are grouped into eight categories based on their focus and approach, and they also find that antisocial behaviour is more prevalent when the experiment was conducted with nonstandard subjects.
Abstract: Antisocial behaviour experiments, both conducted in the laboratory or in the field, have become commonplace in the experimental economics literature. Such experiment found its relevance in the real world as people are not always selfish or nice to others, but they also sometimes behave spitefully. This paper focuses on payoff-destruction experiments conducted over the last two decades and synthesises the findings. We are able to find 46 studies, of which the antecedents of antisocial behaviour are grouped into eight categories based on their focus and approach. We also find that antisocial behaviour is more prevalent when the experiment was conducted with nonstandard subjects. We conclude with suggestions for future research.
6 citations
TL;DR: This article study the normative acceptability of the trade-off between immoral profit (discrimination) and costly morality (non-discrimination), and test the causal influence of the causal influen...
Abstract: Using an original vignette survey, we study the normative acceptability of the trade-off between immoral profit (discrimination) and costly morality (non-discrimination). We test the causal influen...
5 citations
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TL;DR: Z-Tree as mentioned in this paper is a toolbox for ready-made economic experiments, which allows programming almost any kind of experiments in a short time and is stable and easy to use.
Abstract: z-Tree (Zurich Toolbox for Ready-made Economic Experiments) is a software for developing and conducting economic experiments. The software is stable and allows programming almost any kind of experiments in a short time. In this article, I present the guiding principles behind the software design, its features, and its limitations.
9,760 citations
"Discrimination as favoritism: The p..." refers methods in this paper
...The experiment was computerized using the Z-tree software package (Fischbacher, 2007)....
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TL;DR: This article showed that if a fraction of the people exhibit inequality aversion, stable cooperation is maintained although punishment is costly for those who punish, and they also showed that when they are given the opportunity to punish free riders, stable cooperations are maintained.
Abstract: There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding opportunities in voluntary cooperation games. Yet, when they are given the opportunity to punish free riders, stable cooperation is maintained although punishment is costly for those who punish. This paper asks whether there is a simple common principle that can explain this puzzling evidence. We show that if a fraction of the people exhibits inequality aversion the puzzles can be resolved.
6,919 citations
"Discrimination as favoritism: The p..." refers background or methods in this paper
...Models of inequality aversion were first proposed by Bolton (1991) and refined by Fehr and Schmidt (1999) and Bolton and Ockenfels (2000)....
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...Using the Blanco et al (2011) tasks, we calculate the and parameters for each subject described in Fehr and Schmidt (1999) as measures of disadvantageous and advantageous inequality, respectively....
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...If the unemployed suffer from disadvantageous inequality aversion then they may be willing to burn money in order to reduce income differences (Fehr and Schmidt, 1999)....
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TL;DR: The authors demonstrate that people are motivated by both their pecuniary payoff and their relative payoff standing, and demonstrate that a simple model, constructed on the premise that people were motivated by either their payoff or their relative standing, organizes a large and seemingly disparate set of laboratory observations as one consistent pattern, which explains observations from games where equity is thought to be a factor, such as ultimatum and dictator, games where reciprocity is played a role and games where competitive behavior is observed.
Abstract: We demonstrate that a simple model, constructed on the premise that people are motivated by both their pecuniary payoff and their relative payoff standing, organizes a large and seemingly disparate set of laboratory observations as one consistent pattern The model is incomplete information but nevertheless posed entirely in terms of directly observable variables The model explains observations from games where equity is thought to be a factor, such as ultimatum and dictator, games where reciprocity is thought to play a role, such as the prisoner's dilemma and gift exchange, and games where competitive behavior is observed, such as Bertrand markets (JEL C78, C90, D63, D64, H41)
5,391 citations
"Discrimination as favoritism: The p..." refers methods in this paper
...Models of inequality aversion were first proposed by Bolton (1991) and refined by Fehr and Schmidt (1999) and Bolton and Ockenfels (2000)....
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Posted Content•
TL;DR: In this article, it is shown that every mutual-max or mutual-min Nash equilibrium is a fairness equilibrium, and that if payoffs are small, fairness equilibria are roughly the set of mutualmax and mutualmin outcomes; if payoff are large, fairness equilibrium are roughly a set of Nash equilibra.
Abstract: People like to help those who are helping them and to hurt those who are hurting them. Outcomes rejecting such motivations are called fairness equilibria. Outcomes are mutual-max when each person maximizes the other's material payoffs, and mutual-min when each person minimizes the other's payoffs. It is shown that every mutual-max or mutual-min Nash equilibrium is a fairness equilibrium. If payoffs are small, fairness equilibria are roughly the set of mutual-max and mutual-min outcomes; if payoffs are large, fairness equilibria are roughly the set of Nash equilibria. Several economic examples are considered and possible welfare implications of fairness are explored. Copyright 1993 by American Economic Association.
4,981 citations
"Discrimination as favoritism: The p..." refers background in this paper
...While there are limitations to how much laboratory money-burning choices can teach us about true societal costs like fragmentation and increased conflict, our data may be seen as providing at least some evidence of one micro-foundation of societal tension, riots, or less extreme but still costly forms of antisocial behavior....
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...Thus, the unemployed may be more willing to sacrifice a part of their payoffs in order to burn employers’ money in Ranking treatments, even when there are no monetary gains from doing so (Rabin, 1993; Falk and Fischbacher, 2006)....
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...However, here we present a framework that incorporates moral motivations (see Figuieres et al, 2013 for details on such models), reciprocity (see Rabin, 1993, for a formal model incorporating fairness into a utility function), and taste-based discrimination (introduced in Becker, 1957)....
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...While this documents multiple dimensions on which discrimination may operate, even in a laboratory environment (see Dickinson and Oaxaca, 2014), the potential for positive reciprocity towards employers by those hired and/or offered high wages implies that such in-group favoritism may be in the monetary payoff interest of the employer....
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...The second component of the moral obligation function can be interpreted as the worker i’s belief regarding employer j’s fairness, in the spirit of Rabin (1993), where a high wage (perhaps anchored around the perceived equitable wage) is perceived as a kind action.17 The moral obligation function…...
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TL;DR: In the second series of experiments, it was found that the maximum joint profit independent of group membership did not affect significantly the manner in which the subjects divided real pecuniary rewards; however, maximum profit for own group did affect the distribution of rewards; and the clearest effect on the subject's attempt to achieve a maximum difference between the ingroup and the outgroup even at the price of sacrificing other "objective" advantages.
Abstract: The aim of the studies was to assess the effefcs of social categorization on intergroup behaviour when, in the intergroup situation, neither calculations of individual interest nor previously existing attitudes of hostility could have been said to have determined discriminative behaviour against an outgroup. These conditions were satisfied in the experimental design. In the first series of experiments, it was found that the subjects favoured their own group in the distribution of real rewards and penalities in a situation in which nothing but the variable of fairly irrelevant classification distinguished between the ingroup and the outgroup. In the second series of experiments it was found that: 1) maximum joint profit independent of group membership did not affect significantly the manner in which the subjects divided real pecuniary rewards; 2) maximum profit for own group did affect the distribution of rewards; 3) the clearest effect on the distribution of rewards was due to the subjects' attempt to achieve a maximum difference between the ingroup and the outgroup even at the price of sacrificing other ‘objective’ advantages.
The design and the results of the study are theoretically discussed within the framework of social norms and expectations and particularly in relation to a ‘generic’ norm of outgroup behaviour prevalent in some societies.
4,523 citations
"Discrimination as favoritism: The p..." refers background in this paper
...In-group favoritism and out-group discrimination have been very robust findings in the social psychology literature (Tajfel et al. 1971; Billig and Tajfel, 1973; Turner and Brown, 1978; Vaughan et al. 1981; Diehl, 1988; Pratto and Shih, 2000)....
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...21In-group favoritism and out-group discrimination have been very robust findings in the social psychology literature (Tajfel et al. 1971; Billig and Tajfel, 1973; Turner and Brown, 1978; Vaughan et al. 1981; Diehl, 1988; Pratto and Shih, 2000)....
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