A Theory of Discrimination and Assimilation∗

In a heterogeneous society with two social groups possessing competing social norms, members of the relatively worse-off group face an incentive to adopt the social norms of the better-off group and assimilate into it. I present a theory in which the cost of assimilation is endogenous and strategically chosen by the better-off group in order to screen those who wish to assimilate. In equilibrium, only high types, who generate positive externalities to the members of the better-off group, assimilate. As an application of the theory, I show that the so called “acting white” phenomenon in which students of a disadvantaged ethnic group punish peers who succeed academically can be explained as an optimal strategy on the part of untalented students to try to keep their more able co-ethnics in their community.