This week, the Supreme Court ruled that state governments can create sub-categories within SCs and STs for reservations to reach the neediest. Economics doesn't fully address how quotas and affirmative action impact competition. Moderate discrimination may improve incentives but breaks down with more quotas or sub-quotas. Incentives for preferred groups decrease with emergence of more preferred groups. The incentive structure splinters with heterogeneous affirmative action, requiring dynamic processes for quota subdivisions.