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http://ssrn.com/abstract=288527
 
 

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Consumer Information and Price Discrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities?


Fiona M. Scott Morton


Yale School of Management; National Bureau of Economic Research (NBER)

Florian Zettelmeyer


University of California, Berkeley - Marketing Group; National Bureau of Economic Research (NBER)

Jorge M. Silva-Risso


University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

January 2002

Yale SOM Working Paper No. ES-15; Haas School, UC Berkeley Marketing Working Paper No. 01-2

Abstract:     
Mediating 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 affect race and gender discrimination in car retailing. Using a large dataset of transaction prices for new automobiles, the first part of the paper analyzes the relationship between car prices and demographics. We find that offline African-American and Hispanic consumers pay approximately 2% more than do other consumers; however, we can explain 65% of this price premium with differences in income, education, and 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. The combination of our results suggests that price discrimination in car buying has a "disparate impact" on minorities and whites rather than being evidence of a "disparate treatment" of these groups. This is because Autobytel.com dealers are very likely to know an Internet consumer's race. 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.

Number of Pages in PDF File: 36

Keywords: Internet, Discrimination, Price Discrimination, Car, Auto, E-commerce

JEL Classification: J7, L1, O3

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Date posted: October 31, 2001  

Suggested Citation

Scott Morton, Fiona M. and Zettelmeyer, Florian and Silva-Risso, Jorge M., Consumer Information and Price Discrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities? (January 2002). Yale SOM Working Paper No. ES-15; Haas School, UC Berkeley Marketing Working Paper No. 01-2. Available at SSRN: http://ssrn.com/abstract=288527 or http://dx.doi.org/10.2139/ssrn.288527

Contact Information

Fiona M. Scott Morton
Yale School of Management
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5569 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Florian Zettelmeyer (Contact Author)
University of California, Berkeley - Marketing Group ( email )
Haas School of Business
Berkeley, CA 94720
United States
510-643-1898 (Phone)
510-643-1420 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Jorge M. Silva-Risso
University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )
Riverside, CA 92521
United States
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