1 Two Sides of the Same Coin: Re-examining Nepotism and Discrimination in a Segmented Society

We report the results from a series of trust games designed to distinguish racial discrimination from racial nepotism, played with a sample of high school students in Cape Town, South Africa. In contrast to the original work in this regard by Fershtmann et al (1995), we find considerably greater heterogeneity in the way that proposers respond to the revealed racial identity of their partner, with nepotism being a dominant behaviour. However, while some proposers exhibit a nepotistic bias in their offers that favours in-group members on average, others exhibit a nepotistic strategy that favours outgroup members. A consequence of this nepotism is that both efficiency and equity are reduced on average