Discrimination involves rewarding or penalizing persons based on their respective social identities rather than on their merits or qualifications. All explanations of discrimination, including contributions in Becker (1957) and Akerlof and Kranton (2000), ascribe a utility function to each individual. This is deeply problematic, because I prove that assigning to individuals binary preferences or their utility function representations entails the impossibility of interpersonal social-identity diversification, rendering all persons in society indistinguishable by identity. Instead, I identify individuals with non-binary preferences, and prove the existence of endogenous social diversification in a Pareto optimal state that exhibits discrimination.
- social identity,
Available at: http://works.bepress.com/nadeem_naqvi/1/