What's Right When You're Left? The Impact of Minority Identity in Competitive and Cooperative Environments

Abstract

This paper investigates how majority-minority inequality arises in different economic environments. In the competitive environment, individuals tend to invest more in competing against members of the majority group, which leads to a minority advantage. In the cooperative environment, individuals tend to invest more in cooperating with members of the majority group, which instead yields a minority disadvantage. This idea is formalized by a game-theoretical model and tested in a laboratory experiment. Consistent with the model’s predictions, the minority subjects earn more in the competitive environment but earn less in the cooperative environment compared to the majority subjects, and the payoff gap is bigger when the minority group is relatively small.