Group Identity in Markets

30 Pages Posted: 8 Aug 2008 Last revised: 22 Jun 2009

See all articles by Kutsal Dogan

Kutsal Dogan

University of Texas at Dallas - Naveen Jindal School of Management

Ernan Haruvy

University of Texas at Dallas - Naveen Jindal School of Management

Sherry Xin Li

University of Texas at Dallas

Date Written: February 20, 2009

Abstract

We present a laboratory experiment that measures the effects of group identity -- one's perceived membership in social groups -- on market transactions in an oligopoly market with a few sellers and buyers. We artificially induce group identity using art preferences and college majors in different treatments, respectively. Subjects are randomly assigned into the roles of buyers and sellers and interact repeatedly. We find that the presence of groups influences both the selection of trade partners and the determination of prices. All else equal, sellers are more likely to make offers to ingroup buyers, but this ingroup favoritism depends on the profile of seller-buyer intrinsic values. We also find that whenever buyers are more likely to accept offers from ingroup sellers, there are considerable ingroup-outgroup price differentials with outgroup sellers charging a lower price than ingroup sellers.

Keywords: group identity, experiments, markets, bargaining

JEL Classification: C91, D61, D63, L13, L14

Suggested Citation

Dogan, Kutsal and Haruvy, Ernan and Li, Sherry Xin, Group Identity in Markets (February 20, 2009). Available at SSRN: https://ssrn.com/abstract=1208869 or http://dx.doi.org/10.2139/ssrn.1208869

Kutsal Dogan (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Ernan Haruvy

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Sherry Xin Li

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

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