Competition reduces some but not all discrimination. Where can one expect competition to reduce discrimination, and where is discrimination likely to go on even if there is competition?

Question

What will be an ideal response?

Answer 1

Competition reduces the employer’s ability to restrict hiring to only preferred races or genders since the reduced supply increases wages and makes the firm unable to match competitor prices. But discrimination within the firm by fellow workers need not be eliminated by competitive forces. If workers are less cooperative for supervisors of a certain race or sex, these supervisors will not be successful. Also, statistical discrimination may remain. Imperfect information leads to lower wages for women because of the higher probability of time off to have children. Women who do not intend to take time off may not be able to differentiate themselves to the employer.