In-group favouritism and out-group hostility are well-documented, but real-world group settings rarely fit a simple dichotomy. Often, a "middle-group" shares some identity markers with the in-group without fully belonging to it. How do people treat such intermediate groups? We address this question using a formal identity marker framework and a multi-lab online experiment (N = 376) with a private allocation task immune to reputation effects and demand characteristics. We find that a middle-group can be treated neutrally, i.e., distinct from both in-group favouritism and out-group hostility, but only under specific conditions. When the middle-group shares two identity markers with the in-group, including university affiliation, a complete hierarchy emerges: the in-group is favoured, the middle-group is treated according to the allocation rule, and the out-group bears the loss. However, when the middle-group shares only one marker, it is treated indistinguishably from the out-group, regardless of which marker is shared. Furthermore, differentiated behaviour evolves only after participants have re-encountered the experimental instructions and group constellation in a second phase, not gradually across rounds. These findings demonstrate that participants can perceive beyond binary in-/out-group categorisation, but such perception requires both sufficient identity overlap and repeated exposure to the group setting. Our identity marker framework provides a tool for systematically studying group relations in more complex settings.
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