Social identity — those markers that determine how we see ourselves and therefore others — can help explain a lot about our irrational behaviours and choices.
A study of the betting choices of soccer fans in Kenya and the UK illustrates clearly how identity — built on one’s support for a soccer team — shapes behaviour, “often leading to skewed beliefs and avoidance of identity-incongruent choices, even at financial costs”.
Obviously, an individual has multiple sources of identity, ranging from sex, race, ethnicity, religion, socioeconomic status to age, and each coming to the fore depending on prevailing circumstances.
The study’s findings are that one’s identity has a huge impact on beliefs and preferences, a finding that has implications for public policy design as well as how firms can position their products and services within certain consumer segments.
The findings also run counter to rational expectation, the economic theory that humans make rational decisions after considering the best available information and drawing from historical trends.
Normative economic models also often assume that beliefs follow rational expectations and “that decision-making, beyond risk preferences, is independent of the origins or affiliations associated with choices or outcomes”.
They also contradict the common assumptions that citizens’ assessment of public policies is informed by evidence. Canadian academic Richard French has said most politically significant judgments “are based upon the meaning of the policy as apprehended by citizens, not in terms of some kind of propositionally rigorous analysis, such as a demonstrated causal relationship among variables or a deduction from first principles”.
French’s statement is confirmed by this new study in which five academics who conducted a field experiment on the betting choices of 802 participants in Kenya and 1,608 in the UK. These soccer fans placed almost 40,000 soccer bets during the 2021/22 English Premier League season.
The overwhelming majority (85%) of Kenyan participants were supporters of Manchester United (36%), Chelsea (31%) and Arsenal (18%). UK’s participants were more spread out across six soccer teams, with Manchester United and Liverpool each accounting for more than 20% of participants.
The study found that support for a team by the participants was more stable over time, with Kenyan participants having been fans for at least 10 years and UK participants for at least 20 years.
The reasons for supporting a team were also important as they were influenced by social identity. They include influences by parents, relatives and peers — all important shapers of one’s social identity. A team’s success rate, jersey colours and certain players were also found to have been big influencers of one’s choice of a soccer team.
The researchers found that supporters’ evaluation of teams’ chances of winning was 10%-18% higher than the assessment of neutral participants.
“These disparities in budget allocation and beliefs hold even when we account for individual and match-specific fixed effects, suggesting a deep-rooted influence of identity on fans’ perceptions and decision-making processes,” the researchers of the study, Identity and Economic Incentives, found.
The study’s authors said their work could help improve the understanding of consumer choice by integrating social identity into economic decision making. “For example, while traditional economics predicts that a price increase will lead to a fall in demand, for products closely tied to social identity, demand might be less elastic when consumers are willing to pay to maintain their social status. This observation can explain why luxury goods sometimes see stable or even increased demand despite rising prices.”
In financial investments, for example, one’s affinity for specific financial assets or products (akin to a soccer fan’s loyalty) may influence one’s choices, even if these choices come with a financial cost — what the authors label an “identity tax”. The authors recommend that policymakers factor identity in designing financial and retirement products.
A subsequent article by Stanford Graduate School of Business quotes Kwabena Donkor, the lead author of the study, as saying people value alignment with their identity (identity-congruency) “more than they value potential profits”, adding that when it came to money, “loyalty isn’t cheap”.
The study’s findings also align with political behaviour theories, in particular behaviour that explains voting choices, political participation and intergroup co-operation.
“Political polarisation shapes interactions and behaviour by reinforcing identity-specific beliefs and preferences. This reinforcement occurs as individuals increasingly perceive political opponents as not just ideologically different but also morally inferior, leading to significant decline in trust and co-operation across party lines.”
As Donkor told Stanford Business, to miss identity is to miss the bigger picture in what informs decision making.
• Sikhakhane, a former spokesperson for the finance minister, National Treasury and SA Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.
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