FEBRUARY 14, 2022

The price of prejudice

Hedegaard S. Morten and Jean Robert Tyran

A REVIEW BY:

Mohd Ashfaq
Roll no: 20227707146
Semester IV
Theme of the Study
Among all the forms of discrimination, the one based on ethnicity is widely prevalence across the world.
Irrespective of the regional parameters, we find that ethnic discrimination practised in most of the
countries, including the most developed ones with a high literacy rate. Generally, Ethnic discrimination
is targeted against the minorities of the state, who maybe indigenous, migrants or refugees. It is to be
noted here that those who discriminate are also economic agents, talking in positive terms. The agents
of discrimination respond to certain economic constraints, such as the cost of discrimination.
Discrimination here acts as any other normal good whose demand declines when the price of
discrimination rises. Similarly, a discrimination with less price or cost to the agent is very easy to
practise. Thus, the main theme of the paper is to examine the responsiveness of discrimination as a good
to the change in its price. To obtain an unbiased dataset and most importantly to study the behaviour of
the agents an experiment is conducted in a tightly controlled environment. The agents on whom the
examination is done do not know that they are participating in an experiment. After imposing many
such restrictions that ensure the process to be as natural as possible an econometric analysis is done to
calculate the “responsiveness”, also called as elasticity of price. It is found that possible agents of
discrimination answer to the price. This price is called as price of prejudice in the paper. This is because
it is the opportunity cost of making decision which enforces discrimination instead of using a secular
approach. Thus, the experiment allows to attach a price tag to the choices of discrimination instead of
just witnessing the discrimination.
The experiment it done by giving the agents a choice to select one among two people to work with who
are of different ethnic origin. The other paraments such as the productivity of the worker which
determines the earning that they both get as a team are controlled.
Merits in the experiment:

• In other kind of field experiments there is a high degree of artificialness. Whereas, this
experiment appears very natural to the agents as it is undertaken in a tightly controlled
environment through which only a little information, which is required, is passed to the agents.
The work mailing work appears to be natural to the teenagers of Denmark as a temporary job
thus it does not make the study doubtful. Prima facies, there is no question of doubt because
the job was real and the letters were used for large scale mailing.
• The most important element which makes it different from the other kind of experiments
conducted on discrimination is that the ability to change the price that discriminator has to
pay. This is done by regulating the data that a possible discriminator has. The price tag attached
to the choices of discrimination. This helps us to study the behaviour of the discriminator under
many different circumstances, like a change in price. It just does not observe, or witness the
happening of discrimination and then quantify is just like other studies have done in the past.
• During the experiment it is ensured that minimal interaction happens between the
participants/agents thus limiting the chances of their decision being influenced by other
factors. This is done my making them work in separate rooms. The team work they do also
require minimal verbal interaction thus minimizes the chances of discriminating the members
on the basis of their language or speech community. Factors such as attractiveness or personal
appearance thus does not affect the decisions.
• The study is gender sensitive and also gender neutral. This is because the participants are
equally selected from both the genders and the agents do not face a choice between a person of
their own and opposite gender. Thus, the choice of the agents in made to be gender neutral.
• Agents are randomly selected from the participants. Random selection is the most unbiased
way to solve any problem of selection. But by doing it in this experiment where the number of
participants is limited the real potential discriminators might be left behind thus impacting the
results of the study
 • The agents are provided with all the necessary information to partake in an informed decision.
Thus, the choices are informative which makes It easy for discriminator to choose thereby
facilitating discrimination. The discriminators are easily detected in this way.
Limitations in the experiment:

• The experiment is done on an individual basis by segregating one agent from the other. It
provides discrimination as a personal choice. But in real life, the choice of discrimination might
be social which is not just limited to individual preferences but also to the preferences of
society as a whole. The parameters which play a role in limiting the discrimination at individual
basis might not work on a social scale, and also there might be other parameters which enforce
the discrimination strictly on a social scale. Thus, the study by examining discrimination on
individual basis makes the results inapplicable to the society as whole.
• The immediate limitation of the paper is its dataset. All the agents belong to a limited age group
that is 16-20 years. We know that the understanding and the values of a person change
according to his age. Thus, the agent we are studying has a very little or no understanding of
the basics of discrimination which might make the judgment biased due to factors he or she
might consider. If this is true then the results are equivalent with an agent practising
discrimination. Thus, there might be an overestimation of discrimination.
• The other important limitation of the study is that it does not make the distinction between
discrimination against a particular origin, like the Muslims here, or 0immigrants in general.
This is because the first names of the minority group may be Muslim sounding but may also be
foreign sounding to the native people.
• The discrimination is measured by giving the agents choices that appear to be non-
discriminatory in form. Thus, drawback is a possible confound of discrimination with a
non-discriminatory preference.
Limitation in methodology:

• The choice is examined under revealed preferences thus it makes the analysis limited to
certainty. In other words, the methodology does not allow to examine the behaviour of the agent
in those choice with involve any kind of uncertainty or risk.
• The equation: ui (same) = ai − b pricei results in an inward sloping demand curve for
discrimination. This might not be the case in all circumstances. The values and attitude of
the agent who is practicing discrimination may be insensitive to its cost. In other words,
the discrimination maybe inelastic in nature which does not respond any incentive. This is
true in many societies where the difference/discrimination is enforced by a strong
authority, or a divine/sacred authority which cannot be questioned. This will result in a
inelastic demand curve. The value of b thus equals to ZERO and there is no price for
discrimination.
• The price of discrimination is not directly observed. Instead, it is exogenously calculated as a
difference between the agents earning with the member of other ethnicity and the agents earning
with the member of same ethnicity. Pricei = p (ŷother − ŷsame)
• The methodology only helps in preparing demand curves for individual agents. The demand curve/or
the demand schedule cannot be drawn for the agents as a whole. The individual demand curve maybe
strictly negative sloping but the social demand curve maybe less elastic or inelastic in nature.
• The aspect of GAME THEORY is not involved. This makes the methodology restrictive to study the
behaviour of the person at individual basis only. There might be cases even at individual basis where the
probability of a potential discriminator to practise discrimination depends on the decisions made by other
discriminators.