What's Right When You're Left? The Impact of Minority Identity in Competitive and Cooperative Environments

Abstract

We theoretically and experimentally explore the impact of minority identity in two contrasting environments: one that encourages competition (all-pay auction contest) and one that encourages coordination (minimum-effort game). There are two types of decision makers and two corresponding types of skills: the majority type and the minority type. Decision makers first decide how to invest between their skill sets, and then they are randomly matched to interacting with each other. We find that in the competitive environment, the minority group members have an advantage compared to the majority group members, as decision makers invest more on the majority skill to maximize chance of winning against the majority group members. In the cooperative environment, by contrast, the minority group members have a disadvantage compared to the majority group members, as decision makers tend to invest on the majority skill to facilitate coordination with the majority group members.

Keywords: minority, inequality, economic environment, laboratory experiment

JEL Classification: C72, C91, D63