Abstract
We study the role of physical attractiveness and gender in a two-player market entry game with a safe and a risky option. Participants are provided with pictures of their co-players’ faces before they make their decisions. We find that co-players’ attractiveness affects individual decision making through two distinct transmission channels, a stereotype-based and a preference-based channel. Both are interacted with gender. Females expect other females who are rated as physically attractive to be less risk averse. As subjects behave rationally with regard to their beliefs, good-looking females face less risky decisions in same-sex dyads. Males also enter the market less often when facing a female co-player. However, males’ motivation is preference-based because their predictions of females’ behavior are not affected by females’ appearance. Thus, physically attractive females face less market entries in both same-sex and mixed-sex settings, but for different reasons. This confirms the existence of a twofold beauty premium in the labor market.
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