In-group and Out-group Biases in the Marketplace: A Field Experiment During the World Cup
39 Pages Posted: 24 Mar 2015 Last revised: 30 Nov 2016
Date Written: November 2016
This paper estimates the effects of group identity on discrimination in the marketplace. We conducted an audit study in two electronics markets in São Paulo, Brazil during the 2014 Brazil World Cup (WC), and recorded the behaviour of 557 sellers in 922 market interactions. To identify discrimination patterns and the rationale behind them, we manipulated the salience of buyers' group membership by making them wear t-shirts of national football teams, and exploit the outcomes of the WC matches, which arguably strengthened sellers' group identity. We detect in-group market favouritism (i.e. lower prices) towards buyers wearing the Brazil t-shirt when Brazil had won a match in the very recent past, and discrimination (i.e. higher prices and lower willingness to trade) against buyers wearing a t-shirt of another winning team. Our analysis rejects the explanation that these differential treatments were always motivated by economic profits. Instead, the results indicate taste-based discrimination (Becker, 1957) and shed light on the ways in which in-group and out-group biases occur in market outcomes.
Keywords: ingroup and outgroup discrimination, bargaining in the marketplace
JEL Classification: C93, D71, J15
Suggested Citation: Suggested Citation