Minority advantage and disadvantage in competition and coordination

We explore how a minority advantage or disadvantage endogenously arises in two contrasting environments. A population comprises two unequally sized groups. Each individual allocates effort between a ‘majority’ skill and a ‘minority’ skill; it is cheaper to invest in the skill of one’s own group. Individuals are subsequently pairwise-matched in an environment that encourages either competition or coordination. We find, both theoretically and experimentally, that under competition, the minority players earn more than the majority players when the share of the minority group is sufficiently small, as players acquire more of the majority skill to maximize the chance of winning against a majority opponent. Moreover, when there are no theoretical predictions for a relatively large share of the minority, we find experimentally that the minority players still enjoy an advantage, and the advantage is smaller. Under coordination, in contrast, payoffs are reversed both theoretically and experimentally: players are more likely to coordinate on the majority skill, and this yields a minority disadvantage; the minority disadvantage grows with the imbalance in the size of the two groups.