  Stereotypes are generalized beliefs about groups of people, which are used to
make decisions and judgments about them. Although such heuristics can be useful
when decisions must be made quickly, or when information is lacking, they can
also serve as the basis for prejudice and discrimination. In this paper we
study the evolution of stereotypes through group reciprocity. We characterize
the warmth of a stereotype as the willingness to cooperate with an individual
based solely on the identity of the group they belong to. We show that when
stereotypes are coarse, such group reciprocity is less likely to evolve, and
stereotypes tend to be negative. We also show that, even when stereotypes are
broadly positive, individuals are often overly pessimistic about the
willingness of those they stereotype to cooperate. We then show that the
tendency for stereotyping itself to evolve is driven by the costs of cognition,
so that more people are stereotyped with greater coarseness as costs increase.
Finally we show that extrinsic "shocks", in which the benefits of cooperation
are suddenly reduced, can cause stereotype warmth and judgement bias to turn
sharply negative, consistent with the view that economic and other crises are
drivers of out-group animosity.
