Conformity, Equity and Correlated Equilibrium
Working Paper No. 08-W06
Edward Cartwright and Myrna Wooders
ABSTRACT [article]
We explore the potential for correlated equilibrium to capture conformity to norms and the coordination of behavior within social groups. Given a partition of players into social groups we propose three properties one may expect of a correlated equilibrium: within-group anonymity, group independence and stereotyped beliefs. Within-group anonymity requires that players within the same social group have equal opportunities and equal payoffs. Group independence requires that there be no correlation of behavior between groups. If beliefs are stereotyped then any two members of a social group are expected to behave identically. We demonstrate that there are subjective correlated equilibrium satisfying within-group anonymity, group independence and stereotyping. We also discuss the efficiency of stereotyping; an individual player does not loose significantly from stereotyping others.. Our results apply when players within social groups are 'similar', and not necessarily identical. A number of related issues, such as fairness, are also discussed.
Keywords and Phrases: Conformity, equity, stereotyping, correlated equilibrium, stereotyped beliefs, subjective correlated equilibrium
JEL Classification Numbers: C72