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The Effects of Competition and Information on Racial Discrimination: Evidence from a Field Experiment

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  • John M. Nunley
  • Mark F. Owens
  • R. Stephen Howard

Abstract

We conduct a field experiment to determine whether racial discrimination can be identified in product-market auctions and, if so, under what conditions it is more likely to emerge. We compare the prices paid for perfectly substitutable products sold on eBay between sellers with distinctively white and distinctively black names. Price differences arise in favor of sellers whose names match the expected racial characteristics of buyers. However, the price differences only emerge in markets characterized by low levels of competition, and eBay's feedback system, which reduces asymmetric information between buyer and seller, is successful at mitigating these differences. The results suggest, rather strongly, that competitive forces and market mechanisms designed to reduce informational asymmetries both can aid in promoting non-discriminatory outcomes in markets.

Suggested Citation

  • John M. Nunley & Mark F. Owens & R. Stephen Howard, 2010. "The Effects of Competition and Information on Racial Discrimination: Evidence from a Field Experiment," Working Papers 201007, Middle Tennessee State University, Department of Economics and Finance.
    • Handle: RePEc:mts:wpaper:201007
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    File URL: http://capone.mtsu.edu/berc/working/eBay_working_paper_4_23_2010.pdf
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    References listed on IDEAS

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    Cited by:

    1. Jennifer L. Doleac & Luke C.D. Stein, 2013. "The Visible Hand: Race and Online Market Outcomes," Economic Journal, Royal Economic Society, vol. 123(11), pages 469-492, November.

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    More about this item

    Keywords

    Racial Discrimination; Statistical Discrimination; Asymmetric Information; Competition; eBay;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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