The power of competition: reducing or reinforcing discrimination?

Economic theory argues that competition can diminish discrimination in the labor market, while arguments from social psychology’s social-identity theory point into the opposite direction. We ran two experiments to test the psychological predictions in an ‘economic’ setting. Participants were categorized artificially and played a team game, facing either strong or weak competition. They further had to choose a new team member from either of the categories, and pay for enactment of their preference. Only under strong competition, subjects were willing to pay for their preference. The result gives qualified support to the prediction from social-identity theory.microeconomics ;