Experimental Design
In our experiment, we introduce color groups. Each participant is assigned to one color group. Interacting participants might belong to the same or different color groups. Furthermore, participants are assigned a role. They either are employers or employees. Participants are sorted into labor markets such that each labor market includes 3 employers and 6 employees. Each employer is paired with two employees of her labor market. These employees are her current employees. Employees have a randomly assigned ability (high, low), which determines how valuable their work is for the employer. Depending on the employees' ability, employers decide which of their two current employees they want to promote. They have to promote one of them. They cannot promote both. The other employers in the labor market do not observe the ability of employees who they don't employ currently. The promotion decision on the other hand is visible. Also, employers can make a wage offer to their own employees and the other four employees in their labor market. For their own employees they can make the wage offer dependent on their abilities. For the other employees they can make their wage offer only dependent on whether or not the employee is promoted by her original employer. Subsequently, a set of rules decides for whom the employees will work. In the experimental treatments we vary the color group composition of employers and employees. We expect first, that employers are more likely to promote their employees from the same color group if they have the same ability as the current employee from a different color group and second, that employers expect other employers to act alike. Consequently, the expected ability of a promoted employee who belongs to the color group of her employer is lower than the expected ability of a promoted employee who does not belong to the the color group of her employer. We expect to see this difference reflected in wage offers to employees.