Entrepreneurship and the Taste for Discrimination

This paper analyzes the connection between discrimination and entrepreneurship. We contend that the entrepreneur is the central mechanism through which inefficiencies associated with discrimination are competed away. In addition to illuminating the mechanism through which existing discrimination tends to be eliminated, we also consider the more difficult case of consumer discrimination. The standard assumption is that consumer discrimination will not be competed away through market forces. In contrast, we find that entrepreneurs can correct the inefficiencies associated with this form of discrimination by influencing the costs and benefits associated with consumer discrimination. We empirically analyze the integration of black players in Major League Baseball to illustrate our theoretical arguments regarding entrepreneurship and consumer discrimination