Discrimination and Preference Primitives

William Bazley, Carina Cuculiza and George Korniotis

No 19514, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We examine the impact of perceived social discrimination on U.S. households' preferences, focusing on key aspects of prospect theory. Utilizing both field and experimental data, we find that perceiving discrimination increases risk tolerance, decreases loss aversion, and excessively distorts objective probabilities. These effects are primarily observed in racial/ethnic minorities, with no significant impact on White individuals. Emotional mechanisms, particularly anger, play a role in transmitting the effects of discrimination on preferences. Overall, our findings underscore how social factors, such as discrimination, can systematically shape fundamental preferences, and ultimately influencing economic decision-making.

Keywords: Cumulative prospect theory; Experiment (search for similar items in EconPapers)
JEL-codes: D01 D90 D91 G40 G41 G50 (search for similar items in EconPapers)
Date: 2024-09
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