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The Visible Hand: Race and Online Market Outcomes

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  • Jennifer L. Doleac

    (Department of Economics, Stanford University)

  • Luke C.D. Stein

    (Department of Economics, Stanford University)

Abstract

We examine the effect of race on market outcomes by selling iPods through local online classified advertisements throughout the United States in a year-long field experiment. Each ad features a photograph of the product being held by a dark- or light-skinned (“black” or “white”) hand. To provide context, we also consider a group of sellers against whom buyers might statistically discriminate for similar reasons: white sellers with wrist tattoos. Black sellers do worse than white sellers on a variety of market outcome measures: They receive 13% fewer responses and 17% fewer offers. These effects are strongest in the Northeast, and are similar in magnitude to those associated with the display of a wrist tattoo. Conditional on receiving at least one offer, black sellers also receive 2–4% lower offers, despite the selfselected—and presumably less biased—pool of buyers. In addition, buyers corresponding with black sellers exhibit lower trust: They are 17% less likely to include their name in e-mails, 44% less likely to accept delivery by mail, and 56% more likely to express concern about making a long-distance payment. We find evidence that black sellers suffer particularly poor outcomes in thin markets; it appears that discrimination may not “survive” in the presence of significant competition among buyers. Furthermore, black sellers do worst in the most racially isolated markets and markets with high property crime rates, consistent with channels through which we might expect statistical discrimination to operate.

Suggested Citation

  • Jennifer L. Doleac & Luke C.D. Stein, 2011. "The Visible Hand: Race and Online Market Outcomes," Discussion Papers 10-025, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:10-025
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    References listed on IDEAS

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    1. Clark Nardinelli & Curtis Simon, 1990. "Customer Racial Discrimination in the Market for Memorabilia: The Case of Baseball," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 575-595.
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    3. Ayres, Ian & Siegelman, Peter, 1995. "Race and Gender Discrimination in Bargaining for a New Car," American Economic Review, American Economic Association, vol. 85(3), pages 304-321, June.
    4. 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.
    5. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, Febrero.
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    More about this item

    Keywords

    race; advertising;

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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