The economics of identity: The origin and persistence of racial identity norms

This study uses evolutionary game theory to model the relationship between racial identity formation and inter-racial disparities in economic and non-economic outcomes. Starting with a fixed population of persons who are easily identified according to an exogenous criterion, for example, phenotype, we then allow individuals to pursue either a racialist or an individualist identity strategy in social interactions. The formation of identity norms imposes both positive and negative externalities on each person's identity actions. There are forces in the model that might push society toward racialism, individualism, or a mixed identity equilibrium, depending on matching assumptions, dynamic assumptions, parameter values, and initial conditions.