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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.

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File URL: http://capone.mtsu.edu/berc/working/eBay_working_paper_4_23_2010.pdf
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Bibliographic Info

Paper provided by Middle Tennessee State University, Department of Economics and Finance in its series Working Papers with number 201007.

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Date of creation: Apr 2010
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Handle: RePEc:mts:wpaper:201007

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Web page: http://www.mtsu.edu/~berc/working/Economics_Working_Papers.html
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Keywords: Racial Discrimination; Statistical Discrimination; Asymmetric Information; Competition; eBay;

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References

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  1. Patrick Bajari & Ali Hortacsu, 2000. "Winner's Curse, Reserve Prices and Endogenous Entry: Empirical Insights from eBay Auctions," Econometric Society World Congress 2000 Contributed Papers 1927, Econometric Society.
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  10. Levitt, Steven D, 2004. "Testing Theories of Discrimination: Evidence from Weakest Link," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 431-52, October.
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Cited by:
  1. Jennifer L. Doleac & Luke C.D. Stein, 2010. "The Visible Hand: Race and Online Market Outcomes," Discussion Papers 09-015, Stanford Institute for Economic Policy Research.

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