Group identity and discrimination in small markets: Asymmetry of in-group favors

We experimentally study the inuence of induced group identity on the determination of prices and beliefs in a small market game. We create group identity through a focal point coordination game. Subjects play a three-person bargaining game where one seller can sell an indivisible good to one of two competing buyers under four different treatments varying the buyer-seller constellation. We find evidence of in group favoritism on the buyer side. However we do not detect a lower ask prices for in-group sellers for in-group buyers, indicating that in-group favoritism is in favor of the more powerful market participan.