Consumer Information and Price Discrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities?
AbstractMediating transactions through the Internet removes important cues that salespeople can use to assess a consumer's willingness to pay. We analyze whether dealers' difficulty in identifying consumer characteristics on the Internet and consumers' ease in finding information affects equilibrium prices in car retailing. Using a large dataset of transaction prices for new automobiles, the first part of the paper an- alyzes the relationship between car prices and demographics. We find that offline African-American and Hispanic consumers pay approximately 2% more than other consumers, however, we can explain 65% of this price premium with differences in income, education,a nd search costs; we find no evidence of statistical race discrimination. The second part of the paper turns to the role of the Internet. Online minority buyers who use the Internet Referral Service we study, Autobytel.com, pay nearly the same prices as do whites, irrespective of their income, education, and search costs. Since members of minority groups who use the Internet may not be representative, we control for selection. We conclude that the Internet is disproportionately beneficial to those who have personal characteristics that put them at a disadvantage in negotiating. African-American and Hispanic individuals, who are least likely to use the Internet, are the ones who benefit the most from it.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8668.
Date of creation: Dec 2001
Date of revision:
Publication status: published as Scott Morton, Fiona, Florian Zettelmeyer, and Jorge Silva-Risso. “Consumer Information and Discrimination: Does the Internet Affect the Pricing of New Cars to Woman and Minorities?” Quantitative Marketing and Economics 1, 1 (2003): 65-92.
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- J7 - Labor and Demographic Economics - - Labor Discrimination
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Florian Zettelmeyer & Fiona M. Scott Morton & Jorge Silva-Risso, 2001. "Cowboys or Cowards: Why are Internet Car Prices Lower?," Yale School of Management Working Papers, Yale School of Management ysm241, Yale School of Management.
- Hausman, Jerry A., 1983. "Specification and estimation of simultaneous equation models," Handbook of Econometrics, Elsevier, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 7, pages 391-448 Elsevier.
- Steven Salop & Joseph Stiglitz, 1977.
"Bargains and ripoffs: a model of monopolistically competitive price dispersion,"
Special Studies Papers, Board of Governors of the Federal Reserve System (U.S.)
94, Board of Governors of the Federal Reserve System (U.S.).
- Salop, Steven & Stiglitz, Joseph E, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 44(3), pages 493-510, October.
- Heckman, James J, 1979.
"Sample Selection Bias as a Specification Error,"
Econometrica, Econometric Society,
Econometric Society, vol. 47(1), pages 153-61, January.
- Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
- Goldberg, Pinelopi Koujianou, 1996. "Dealer Price Discrimination in New Car Purchases: Evidence from the Consumer Expenditure Survey," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(3), pages 622-54, June.
- Ayres, Ian & Siegelman, Peter, 1995. "Race and Gender Discrimination in Bargaining for a New Car," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 304-21, June.
- Florian Zettelmeyer & Fiona Scott Morton & Jorge Silva-Risso, 2001. "Cowboys or Cowards: Why are Internet Car Prices Lower?," NBER Working Papers 8667, National Bureau of Economic Research, Inc.
- Fiona Scott Morton & Florian Zettelmeyer & Jorge Silva-Risso, 2001. "Internet Car Retailing," NBER Chapters, in: E-commerce, pages 501-519 National Bureau of Economic Research, Inc.
- Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(3), pages 345-64, July.
- Morton, Fiona Scott & Zettelmeyer, Florian & Silva-Risso, Jorge, 2001. "Internet Car Retailing," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 49(4), pages 501-19, December.
- Hiroshi Ono & Madeline Zavodny, 2002.
"Race, Internet usage, and E-commerce,"
Working Paper, Federal Reserve Bank of Atlanta
2002-1, Federal Reserve Bank of Atlanta.
- Barbara L. Wolfe & Robert H. Haveman, 2002. "Social and nonmarket benefits from education in an advanced economy," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, vol. 47(Jun), pages 97-142.
- Kugler, Tamar & Neeman, Zvika & Vulkan, Nir, 2006.
"Markets versus negotiations: An experimental investigation,"
Games and Economic Behavior, Elsevier,
Elsevier, vol. 56(1), pages 121-134, July.
- Tamar Kugler & Zvika Neeman & Nir Vulkan, 2003. "Markets Versus Negotiations: An Experimental Investigation," Discussion Paper Series, The Center for the Study of Rationality, Hebrew University, Jerusalem dp319, The Center for the Study of Rationality, Hebrew University, Jerusalem.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.