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My background is more in statistics and applied math, so I am not familiar with the breadth of decision making models from economics. However, I am working on a project that involves decision making models, especially with reference to racism and/or sexism in hiring or labor market decisions. I was just wondering if there were any existing economics papers that model decision making where some decision-makers in the decision making process subscribe to differing levels of prejudiced beliefs.

Of course I did search google scholar and looked at the microeconomics section of the American Economic Journal. I found a bunch of statistical papers which demonstrate that there is bias in hiring. But I am really looking for something with a model of the decision making process that includes a racism or sexism component.

Any suggestions would be appreciated.

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There is a large literature on this, particularly in the context of labour markets. Some classic references:

  • Becker (1957) analyses employers who care about making profits but also seek to avoid interacting with certain groups. One famous result is employer prejudice need not lead to racial wage gaps as long as there are enough non-prejudiced employers to hire the minority group.

  • Phelps (1972) models employers who use demographic information (e.g. gender or race) as proxies for unobserved but productivity relevant variables. Unsurprisingly, it turns out that differences in means or variances across demographic groups can induce employers to discriminate in this setting.

  • Similar models are developed by Arrow (1971) and Aigner and Cain (1977). I would particularly recommend reading the latter.

  • Here are some lecture notes which provide a useful overview of some of the main issues and ideas.

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  • $\begingroup$ Thanks @afreelunch , I just had not found these papers. I really appreciate the references and for giving a little description of the work. It will be interesting to delve into some of these idea and see how they jive with more recent ideas in game theory, etc. Much appreciated. $\endgroup$ – krishnab Dec 13 '18 at 19:45

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