Can Concerns for Social Status Mitigate the â€˜Lemons Problemâ€™? Experimental Evidence from the Indian Caste Hierarchy
Subhasish Dugar and
Journal of South Asian Development, 2019, vol. 14, issue 2, 151-179
We conducted a lab-in-the-field experiment to analyse if and how information about an individualâ€™s social status influences efficient choices in a two-party hidden information game in which trust and trustworthiness play a central role. Recruitment of subjects from three status groups based on the Indian caste system allows us to distinguish between identity-based and status-based preferences. We find that all status groups exhibit strong in-group favouritism which fosters efficiency. The decisions of subjects from the two lower-status groups align well with identity-based preferences as they treat their out-group co-players in a statistically equivalent manner. However, subjects from the top of the hierarchy exhibit behaviour consistent with status-based preferences as their propensity to choose efficient actions systematically declines with an increase in the distance between their status and their co-playerâ€™s status. Thus, the behaviour of the top-status group closely conforms to the actual social rankings of these caste groups in India, whereas the behaviour of lower-status groups displays a binary classification of people into â€˜usâ€™ and â€˜themâ€™.
Keywords: Social status; adverse selection; lab in the field experiment; India (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:soudev:v:14:y:2019:i:2:p:151-179
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