Race and Gender Discrimination in Bargaining for a New Car Ian Ayres Peter Siegelman.
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Transcript of Race and Gender Discrimination in Bargaining for a New Car Ian Ayres Peter Siegelman.
Race and Gender Discrimination in Bargaining for a New Car
Ian Ayres
Peter Siegelman
The Method
4 Groups AnalyzedWhite MalesWhite FemalesBlack MalesBlack Females
Audit TechniquePairs (one always white male)
The Method
38 testers 306 cars 153 dealerships in Chicago Nine car models Conducted at Off-peak hours
The Method
RandomnessDealershipsTesters to DealershipsComposition of PairsFirst to Enter
The Method – Bargaining
Each tester followed a “uniform bargaining script that instructed them to focus quickly on one particular car and start negotiating over it. At the beginning of the bargaining, testers told dealers that they ould provide their own financing.”
The Method – Bargaining Strategies Initial offer
Counter offer equal to the dealer’s marginal cost for the car
“split-the-difference” strategy “fixed-concession” strategy
Controls and Uniformity
Age: all testers were between 28 and 32 years old
Education: All testers had 3-4 years of postsecondary education
Attractiveness: All testers were subjectively chosen to have average attractiveness.***
Controls and Uniformity
Similar signs of economic classAll testers wore similar “yuppie” sportswear
and drove to the dealership in similar rented cars
Testers had a long list of contingent responses to the questions they were likely to encounter (i.e. career or address)
Controls and Uniformity
Two days of trainingMock negotiationsMemorized bargaining script
Testers did not know the circumstances of the study
Trends
The differences in prices quoted are robust to a variety of alternative specifications.Fixed vs. Random Effects Individual-Tester EffectsAttempted acceptances versus Refusals
Trends
Nonparametric Tests for Race and Gender
Trend Conclusions
1) Both final and initial offers display large and significant differences in outcomes by race and gender.
2) Results are robust. The magnitude and significance of the race and gender effects under various alternative specifications, combined with the insignificance of the individual-tester effects, reinforce conclusions.
Sources of Discrimination
Animus based discrimination Statistical Discrimination
Animus
Owner animus Employee Animus Customer Animus
Evidence argues against animus-based theories as primary explanation
Statistical Theories
Search CostsLikelihood of owning car when they already
have oneQuestions about owning a car, visiting other
dealershipsBlacks in the suburbs
Statistical Theories
Consumer InformationNegotiable Sticker PriceOffers given at Sticker Price
Statistical Theories
Bargaining CostsBuyer’s aversion to conducting negotiations
Conclusion
“Chicago car dealers offered black and female testers significantly higher prices than the white males with whom they were paired, even though all testers used identical bargaining strategies”