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Study Finds Race Affects Financial Deals

Update Date: Oct 21, 2013 02:48 PM EDT

Over the years, several campaigns and initiatives have been created to educate people about racism with the hopes of breaking down stereotypes. Despite increased awareness, racism is still at large throughout the world. In a new study, researchers from New York University (NYU) set out to examine the role of race in relation to financial contracts. The researchers stated that they were inspired by the 2011 U.S. Government's debt ceiling debates. During these debates, representatives were willing to reject deals even if the rejection would damage their own supporters.

"The debate led us to wonder: Are people willing to punish members of another group when they perceive their behavior as unfair, even when exacting that punishment comes at a personal cost? Many members of both the House and Senate seemed willing to incur costs that would hurt their own constituents in order to vote along political lines." explained lead investigator, psychologist Dr. Jennifer Kubota. "It has been suggested that race bias in economic decisions may not occur in a market where discrimination is costly, but these findings provide the first evidence that this assumption is false."

For this study, Kubota and colleagues recruited 49 participants from diverse ethnic and racial backgrounds. The volunteers were paired up and asked to play the ultimatum game. Within the pairs, one participant was the proposer and was given $10 to split with the partner. The proposer can split the money in any way that he or she desired. The partner would then either accept the deal or reject it. If the partner rejected the offer, neither party would receive any money at all.

The researchers found that partners were more willing to accept a financial deal if the proposer was a white person as opposed to a black person. In addition, the researchers also observed that black proposers had to offer up for money than white proposers to their partners in order to get them to agree with the proposal. The researchers stated that this study shows that race is a driving factor in financial contracts, which could lead to unfair agreements. Due to the risk of exploitation, racism and stereotypes need to be broken down more effectively.

"Our work suggests that after offers are on the table, people perceive the fairness of those offers differently - even when they are objectively identical - based on race," Kubota added. "These findings may be especially relevant for legal and economic decisions and serve as a potential example of how people punish unfair or negative behavior in real-life."

The study was published in Psychological Science.

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