The Potential of Social Identity for Equilibrium Selection

TLDR: In this paper, a group-contingent social preference model was proposed and conditions under which social identity changes equilibrium selection for minimum-effort game in the laboratory under parameter configura tions, which lead to an inefficient loweffort equilibrium for subjects with no group identity.

Abstract: When does a common group identity improve efficiency in coordina tion games? To answer this question, we propose a group-contingent social preference model and derive conditions under which social identity changes equilibrium selection. We test our predictions in the minimum-effort game in the laboratory under parameter configura tions which lead to an inefficient low-effort equilibrium for subjects with no group identity. For those with a salient group identity, con sistent with our theory, we find that learning leads to ingroup coor dination to the efficient high-effort equilibrium. Additionally, our theoretical framework reconciles findings from a number of coordi nation game experiments. (JEL C71, C91, D71) Today's workplace comprises increasingly diverse social categories, including various racial, ethnic, religious, and linguistic groups. Within this environment, many organizations face competition among employees in different departments, as well as conflicts between permanent employees and contingent workers (tem porary, part-time, seasonal, and contracted employees). While a diverse work force contains a variety of abilities, experiences, and cultures which can lead to innovation and creativity, diversity may also be costly and counterproductive if members of work teams find it difficult to integrate their diverse backgrounds and work together (Shaun P. Hargreaves Heap and Daniel J. Zizzo 2009). This issue of integrating and motivating a diverse work force is thus an important consider ation for organizations. One method to achieve such integration is to develop a common identity. In practice, common identities have often been used to create common goals and values. To create a common identity and to teach individuals to work together toward a common purpose, companies have attempted various creative team-building exercises, such as simulated space missions where the crew works together to overcome malfunctions, perform research, and keep life sup port systems operational while navigating through space (J. R. Ball 1999), and