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  5. Asymmetric Players in a Meritocracy: A Case for Affirmative Action

American Economic Journal:
Microeconomics

ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)

Asymmetric Players in a Meritocracy: A Case for Affirmative Action

  • Tanjim Hossain
  • John Morgan
American Economic Journal: Microeconomics (Forthcoming)

Abstract

We model decisions to apply for college admission, attend job auditions, or run for C-suite positions as costly entry into meritocracies, where the entrant with the highest ability wins a reward. Ability is privately known and players generically differ in commonly-known characteristics such as ability distributions, entry costs, or payoffs from winning. Any infinitesimal difference leads to wildly different equilibrium entry probabilities, explaining large dispersion in representation of comparable but non-identical population groups. Affirmative action policies such as handicapping advantaged players or surcharging them to subsidize disadvantaged players increase participation rates of disadvantaged players and, in return, increase social welfare.

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