Shared fortune leads to in-group bias, while shared misfortune does not

Fortune and identity. Gary Charness, Xin Jiang. Economics Letters, December 14 2022, 110954. https://doi.org/10.1016/j.econlet.2022.110954

Abstract: While group identity can generate in-group bias, the topic of how activities generate group affiliation is largely unexplored. We experimentally study the effect of shared experience on group affiliation, varying shared experiences by paying subjects differently for the same task. The results show that shared fortune leads to in-group bias, while shared misfortune does not.

Introduction

Economists have provided evidence that people exhibit an in-group bias in a variety of contexts, including charity (Chen and Li, 2009) and truth-telling (Rong et al., 2016). Many studies have found in-group favoritism even with the minimal-group paradigm, an almost trivial intergroup categorization. However, typically economists have only considered natural-identity categories such as race, gender, ethnic and religion (Hoff and Pandey, 2006, Benjamin et al., 2010). We extend the minimal-group paradigm to an environment where initial monetary reward based one’s induced group identity is based on pure luck.

It is intuitive to think that shared experience would establish a bond among people, potentially encouraging them to help and cooperate with each other. Therefore, matching people with the same experience might lead to a form of in-group bias. However, it is difficult to study the effect of shared experience in the field without confounds. Lab experiments offer a high degree of control and seem a useful tool for studying the effect of shared experiences in a stylized environment.

This study investigates how shared misfortune and fortune shape one’s sense of group affiliation. We assume that shared experiences generate group cohesion. In addition, the literature on prospect theory and loss aversion has provided considerable evidence that negative events have a larger effect on people’s behavior than positive events. Thus, we further expected that unfortunate participants would show more in-group favoritism than the fortunate participants.

The closest cousin to our study is Cassar and Klein (2019), who found that lottery failures favor other lottery failures more than other people, and there was no significant in-group bias among lottery winners. Our results differ from theirs in that shared fortune leads to in-group bias, while shared misfortune does not. The difference may come from the inequality-generation part. Cassar and Klein (2019) informed subjects of their absolute performance in a real-effort task, and the fact that their payoffs are randomly decided. It was not clear how people identified themselves with two pieces of information. The largest contribution of our experiment is that we resolve this concern. In our experiment, participants do the same task, and have the same performance. So, it is quite clear that their payoffs from this task only reflect random luck.