Existing studies on prejudice, which is important in multi-group dynamics in societies, focus on the social-psychological knowledge behind the processes involving prejudice and its propagation. We instead create a multi-agent framework that simulates the propagation of prejudice and measures its tangible impact on the prosperity of individuals as well as of larger social structures, including groups and factions within. Groups in society help us define prejudice, and factions represent smaller tight-knit circles of individuals with similar opinions. We model social interactions using the Continuous Prisoner’s Dilemma (CPD) and a type of agent called a prejudiced agent, whose cooperation is affected by a prejudice attribute, updated over time based both on the agent’s own experiences and those of others in its faction. This model generates various results that both provide new insights into intergroup prejudice and its effects, as well as highlight and reinforce certain existing notions of prejudice.