The Origins of In-Group Bias and the Cost of Signaling sociality • Special Seminar, Job Talk

Abstract: All around us we see that people form groups, that these groups are often indifferent to other groups in the best case, or hostile to other groups in the worst case, and that many cohesive groups push their members to signal their belonging to the group by performing actions that involve some self-sacrifice. In this paper we show that the tendency of people to form groups of limited size and to show in-group favoritism can be traced back to a fundamental characteristic of our mentality -- the psychological cost we pay for not reciprocating the kind actions of others. Moreover, a difficultly in spotting asocial individuals, who do not care to cheat on others for material gain, may lead to the emergence of costly signaling of sociality. Groups that adopt such practices are characterized by a high level of cooperation among group members, and can coexist alongside groups with no signaling and a lower level of cooperation. When such coexistence is sustained by an envy-free equilibrium, the welfare of all individuals is strictly inferior than would have been had signaling been impossible. Thus, the cost of signaling is twofold: the individual cost of producing it, and the social cost of ending up in an inferior equilibrium.