Matching and Segregation: an Experimental Study

Social segregation is a ubiquitous feature of human life. People segregate along the lines of income, religion, ethnicity, language, race, and other characteristics. This study provides the first experimental examination of decentralized matching with search frictions and institutionalized segregation. The findings indicate that, without a segregation institution, high types over-segregate relative to the equilibrium prediction. We observe segregation attempts even when equilibrium suggests that everyone should accept everyone else. In the presence of a segregation institution, high types successfully segregate themselves from low types in most sessions, despite chasing behavior of some low types. However, high type over-segregation behavior destroys the efficiency gain from the segregation institution.