Experience-Based Discrimination

This paper presents a simple classroom game in which students are randomly designated as either employers, purple workers, or green workers. This environment may generate “statistical” discrimination if workers of one color tend not to invest because they anticipate poor job assignments, and these beliefs are self-confirming as employers learn that it is more profitable to assign workers of that color to the non-managerial jobs. Such discriminatory equilibria may arise even when workers are ex-ante identical and the employer has no prior information regarding potential workers. The exercise typically generates a lively discussion about discrimination and how it may be addressed by alternative public policies.