In-group and out-group biases in the marketplace: a field experiment during the World Cup

Abstract

We investigate the effects of group identity on discrimination by conducting an audit study in electronics markets in Sao Paulo, Brazil during the 2014 Brazil World Cup (WC). We manipulated buyers' group membership, by making them wear shirts of national football teams, and exploit the outcomes of the WC matches, which arguably affected the salience of sellers' group identity. Although we find that foreigners are overcharged, we do not detect discrimination against buyers wearing a rival team shirt. In contrast, we do detect in-group market favouritism (i.e., lower prices) towards buyers wearing the Brazil shirt when Brazil had won a match in the very recent past. Our analysis rejects the explanation that sellers' behaviour 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.