This project advances knowledge in both the fields of psychology and economics by integrating understanding of the psychological processes associated with social identity (e.g. ingroup bias, group norms) with understanding of individual decision-making in the economic domain (e.g. social preferences, mechanism design and equilibrium selection). To date, research in social psychology has developed a broad base of knowledge about the influence of social identity on attitudes and behaviors; however, little is known about the economic consequences of these processes. Similarly, standard economic theories have explicated processes underlying individual preferences but have no systematic empirical foundation which incorporates group identity into individual preferences. This project draws on the theory and methods developed in social psychology and experimental economics to bridge the two bodies of work and inform us of the relationship between social identity and social preferences. Thus, the results of the studies will extend our knowledge in both these fields of study. The PIs will first explicitly measure the effects of social identity on social preferences. Based on the outcome of this research, a second research stream will be initiated examining the effects of group identity and, in particular, a common identity, on contract design and public goods productions. Finally, the PIs will examine the effects of group identity on equilibrium selection, an important unresolved issue in game theory.
Broader Impact: As the world becomes more integrated, managing diversity becomes an increasingly important issue to understand. For instance, organizations are more frequently encountering the issue of integrating a diverse workforce, and motivating members coming different backgrounds to work towards a common goal. The results of the proposed research can inform us about the role of social identity in eliciting decisions from individuals to maximize social-welfare, to prioritize organizational goals above self-interest, and to exert more effort. From the perspective of the organizations, this research will provide insights on whether an organization should invest resources to create and enforce a common identity among its workers.
