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There are many social psychological theories regarding the nature of prejudice, but only one major theory of prejudice reduction: under the right circumstances, prejudice between groups will be reduced with increased contact. On the one hand, the contact hypothesis has a range of empirical support and has been a major force in social change. On the other hand, there are practical and ethical obstacles to any large-scale controlled test of the hypothesis in which relevant variables can be manipulated. Here we construct a spatialized model that tests the core hypothesis in a large array of game-theoretic agents. Robust results show that prejudicial strategies flourish in a segregated environment but are eliminated in an integrated environment. We take this to offer a new kind of support for the contact hypothesis. The model also suggests a deeper gametheoretic explanation for some of the social phenomena at issue.