Opportunistic discrimination

Are minorities more vulnerable to opportunism? We find that individuals from a minority group face greater danger of being cheated because trade with them is less frequent and the value of a reputation for fairness toward them is correspondingly smaller. When the majority is sufficiently large it can only lose from a solidarity strategy of punishing opportunism against the minority, so a firm that cheats the minority can still continue business as usual with the majority. If there is a small chance that a firm might have an implicit or preference bias against either group, then the interaction with reputational incentives gives unbiased firms an incentive to cheat the minority but not the majority. The prediction that smaller groups are more susceptible to discrimination distinguishes the model from most other discrimination models.