Seeing What is Representative*

Ignacio Esponda, Ryan Oprea and Sevgi Yuksel

The Quarterly Journal of Economics, 2023, vol. 138, issue 4, 2607-2657

Abstract: We provide evidence for a bias that we call “representative signal distortion” (RSD), which is particularly relevant to settings of statistical discrimination. Experimental subjects distort their evaluation of new evidence on individual group members and interpret such information to be more representative of the group to which the individual belongs (relative to a reference group) than it really is. This produces a discriminatory gap in the evaluation of members of the two groups. Because it is driven by representativeness, the bias (and the discriminatory gap) disappears when subjects are prevented from contrasting different groups; because it is a bias in the interpretation of information, it disappears when subjects receive information before learning of the individual’s group. We show that this bias can be easily estimated from appropriately constructed data sets and can be distinguished from previously documented inferential biases in the literature. Importantly, we document how removing the bias produces a kind of free lunch in reducing discrimination, making it possible to significantly reduce discrimination without lowering accuracy of inferences.

Date: 2023
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