Taste-based Discrimination Theory

A firm must decide how many black and white workers to hire. Suppose black and white workers are equally productive, but the market wage for black workers is $10, and the market wage for white workers is $13. What will the racial composition of the workers hired be if the firm has a coefficient of discrimination against black workers equal to d=0.1?

• The firm will only hire black workers.
• The firm will only hire white workers.
• The firm is indifferent between hiring black and white workers, so it will be a mix.
• More information is needed.