Better the Devil You Know : The Effects Of Group Identity Uncertainty on Coordination Efficiency
There is extensive evidence documenting the economic consequences of discrimination patterns between individuals belonging to the same or different group identities. However, many group identities rely on convictions and beliefs that are non-observable, and therefore, might be uncertain. This paper investigates the effects of group identity uncertainty on individual interaction preferences and willingness to coordinate. Results from a laboratory experiment using a weakest-link game with endogenous group formation show that group identity uncertainty and diversity differently affect individual interaction preferences. Interestingly, individuals whose group identity is not observable are negatively discriminated against more than individuals with different group identity in the long term. Nevertheless, all discrimination patterns vanish when interactions entail high and mutual economic incentives for individuals. The findings offer several managerial implications for deterring discrimination and increasing coordination efficiency in teams