  When information acquisition is costly but flexible, a principal may
rationally acquire information that favors "majorities" over "minorities."
Majorities therefore face incentives to invest in becoming productive, whereas
minorities are discouraged from such investments. The principal, in turn,
rationally ignores minorities unless they surprise him with a genuinely
outstanding outcome, precisely because they are less likely to invest. We give
conditions under which the resulting discriminatory equilibrium is most
preferred by the principal, despite that all groups are ex-ante identical. Our
results add to the discussions of affirmative action, implicit bias, and
occupational segregation and stereotypes.
