Black, Asian, and White participants (N = 210) created self-resembling avatars and engaged in peer-selection tasks during social events in the virtual world, Second Life, that were designed to simulate various types of resource competition. Participants in merit-based resource competition settings had less diversity in their peer groups compared to participants in settings where no resource competition was present, and Asian participants had lower preference for Black peers. Furthermore, these relationships were mediated by out-group discomfort. Results are discussed in relation to partial support for triangulated threat theory of group relations among Blacks, Asians, and Whites. [ABSTRACT FROM PUBLISHER]