2014, European Economic Review
Rick Harbaugh, Ted To
Are minorities more vulnerable to opportunism? We find that individuals from a minority group face greater danger of being cheated because trade with them is less frequent and the value of a reputation for fairness toward them is correspondingly smaller. When the majority is sufficiently large it has no reason to fear opportunism, so a firm can continue business as usual with the majority even after cheating the minority. If there is a small chance that a firm might have an implicit or preference bias against either group, then the interaction with reputational incentives gives unbiased firms an incentive to cheat the minority but not the majority. The prediction that smaller groups are more susceptible to discrimination distinguishes the model from most other discrimination models.
Harbaugh, Rick, and Ted To (2014), "Opportunistic Discrimination," European Economic Review, 66: 192-204.
discrimination, trust, social capital, opportunism, implicit bias, reputation spillover
Opportunistic Discrimination (56 KB)