Group identity in markets |
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Authors: | Sherry Xin Li Kutsal Dogan |
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Institution: | a School of Economic, Political and Policy Sciences (EPPS), University of Texas at Dallas, GR31, 800 W. Campbell Rd., Richardson, TX 75080, United Statesb School of Management, SM32, University of Texas at Dallas, 800 West Campbell Road, Richardson, TX 75083-0688, United Statesc Graduate School of Business, Ozyegin University, Kusbakisi Cad. No 2 34662, Altunizade, Istanbul, Turkey |
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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 trading partners and the determination of prices. All else equal, sellers are more likely to make offers to ingroup buyers, and the buyers are more likely to accept offers from ingroup sellers. There are considerable intergroup price differentials with the outgroup sellers charging a lower price than the ingroup sellers. |
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Keywords: | C91 D61 D63 L13 L14 |
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