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

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

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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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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  1. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  2. P. A. Riach & J. Rich, 2002. "Field Experiments of Discrimination in the Market Place," Economic Journal, Royal Economic Society, vol. 112(483), pages 480-518, November.
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  4. Patrick Bajari & Ali Horta�su, 2004. "Economic Insights from Internet Auctions," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 457-486, June.
  5. Paul Resnick & Richard Zeckhauser & John Swanson & Kate Lockwood, 2006. "The value of reputation on eBay: A controlled experiment," Experimental Economics, Springer, vol. 9(2), pages 79-101, June.
  6. Price, Joseph & Wolfers, Justin, 2007. "Racial Discrimination Among NBA Referees," CEPR Discussion Papers 6369, C.E.P.R. Discussion Papers.
  7. Kate Antonovics & Brian G. Knight, 2009. "A New Look at Racial Profiling: Evidence from the Boston Police Department," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 163-177, February.
  8. Hossain Tanjim & Morgan John, 2006. "...Plus Shipping and Handling: Revenue (Non) Equivalence in Field Experiments on eBay," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(2), pages 1-30, January.
  9. Roland G. Fryer & Steven D. Levitt, 2003. "The Causes and Consequences of Distinctively Black Names," NBER Working Papers 9938, National Bureau of Economic Research, Inc.
  10. Marianne Bertrand & Sendhil Mullainathan, 2003. "Are emily and greg more employable than lakisha and jamal? A field experiment on labor market discrimination," Natural Field Experiments 00216, The Field Experiments Website.
  11. John List, 2004. "The nature and extent of discrimination in the marketplace: Evidence from the field," Natural Field Experiments 00299, The Field Experiments Website.
  12. Ali Hortaçsu & F. Asís Martínez-Jerez & Jason Douglas, 2009. "The Geography of Trade in Online Transactions: Evidence from eBay and MercadoLibre," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 53-74, February.
  13. 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.
  14. Steven D. Levitt, 2003. "Testing Theories of Discrimination: Evidence from "Weakest Link"," NBER Working Papers 9449, National Bureau of Economic Research, Inc.
  15. Kate Antonovics & Peter Arcidiacono & Randall Walsh, 2005. "Games and Discrimination: Lessons From The Weakest Link," Journal of Human Resources, University of Wisconsin Press, vol. 40(4), pages 918-947.
  16. Carlsson, Magnus & Rooth, Dan-Olof, 2007. "Evidence of ethnic discrimination in the Swedish labor market using experimental data," Labour Economics, Elsevier, vol. 14(4), pages 716-729, August.
  17. repec:tpr:qjecon:v:116:y:2001:i:1:p:161-188 is not listed on IDEAS
  18. Altonji, Joseph G. & Blank, Rebecca M., 1999. "Race and gender in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 48, pages 3143-3259 Elsevier.
  19. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
  20. Kerwin Kofi Charles & Jonathan Guryan, 2008. "Prejudice and Wages: An Empirical Assessment of Becker's The Economics of Discrimination," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 773-809, October.
  21. James J. Heckman, 1998. "Detecting Discrimination," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 101-116, Spring.
  22. David Lucking-Reiley & Doug Bryan & Naghi Prasad & Daniel Reeves, 2007. "PENNIES FROM EBAY: THE DETERMINANTS OF PRICE IN ONLINE AUCTIONS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 223-233, 06.
  23. Ahmed, Ali M. & Hammarstedt, Mats, 2008. "Discrimination in the rental housing market: A field experiment on the Internet," Journal of Urban Economics, Elsevier, vol. 64(2), pages 362-372, September.
  24. Fershtman, C. & Gneezy, U., 2000. "Discrimination in a Segmented Society: an Experimental Approach," Papers 2000-9, Tel Aviv.
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