On the Origin and Persistence of Identity-Driven Choice Behavior

Recent literature shows equally performing individuals belonging to different social groups can have different beliefs about their abilities, and, consequently, make different educational and occupational choices. This paper contributes to understanding this phenomenon. I show people can use statistics about the prevalence of their social group among the successful individuals in a task to cope with the adverse effects of momentary sources of noise and improve decision making on average, even when these statistics are irrelevant in a Bayesian sense. This individually optimal behavior can nevertheless induce persistent asymmetries in belief formation and choice behavior across otherwise identical social groups.