The Cost of Racial Bias in Economic Decisions

From Press Release

When financial gain depends on cooperation, we might expect that people would put aside their differences and focus on the bottom line. But new research suggests that people’s racial biases make them more likely to leave money on the table when a windfall is not split evenly between groups.

The findings are published in Psychological Science, a journal of the Association for Psychological Science.

 “It has been suggested that race bias in economic decisions may not occur in a market where discrimination is costly, but these findings provide the first evidence that this assumption is false,” explain psychological scientists Jennifer Kubota and Elizabeth Phelps of New York University. “Our work suggests that after offers are on the table, people perceive the fairness of those offers differently — even when they are objectively identical — based on race.”

The research was inspired by the debt ceiling debates that raged on in the summer of 2011.

“Many members of both the House and Senate seemed willing to incur costs that would hurt their own constituents in order to vote along political lines,” say Kubota and Phelps. “The debate led us to wonder: Are people willing to punish members of another group when they perceive their behavior as unfair, even when exacting that punishment comes at a personal cost?”

The researchers decided that an important first step in understanding this phenomenon, given race-based financial disparities in the United States, would be to examine interracial economic decisions.

Source: APA

Link to full APA Press Release: The Cost of Racial Bias in Economic Decisions

Link to abstract for study published in Psychological Science: The Price of Racial BiasIntergroup Negotiations in the Ultimatum Game

Download pdf of The Price of Racial BiasIntergroup Negotiations in the Ultimatum Game (academic affiliation / subscription may be required)