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Taste-for-discrimination vs statistical discrimination

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Males under the age of 25 must pay far higher auto insurance premiums than females in this age group. How does this fact relate to statistical discrimination? Statistical discrimination implies that discrimination can persist indefinitely, while the taste-for-discrimination model suggests that competition might reduce discrimination in the long run. Explain the difference with references.

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Solution Summary

This solution discusses a taste-for-discrimination vs statistical discrimination and how competition affects each type.

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Statistical discrimination occurs when a person belongs to a group whose average behavior differs from the norm. For example, young men tend to be more reckless drivers than older people, or women. Therefore, even if you are a young man who is a very safe driver, you will not be able to obtain low auto insurance rates. Another example is screen job applicants based on the college from which they graduated. An employer may find that graduates of certain colleges are ...

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