Market Competition and Discrimination

49 Pages Posted: 26 May 2020

See all articles by Abu Siddique

Abu Siddique

Technical University of Munich

Michael Vlassopoulos

University of Southampton

Yves Zenou

Monash University - Department of Economics; Stockholm University; Research Institute of Industrial Economics (IUI); IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: April 27, 2020

Abstract

Becker (1957) famously postulated that taste-based discrimination should disappear in the long run if the market operates competitively. This study provides evidence in support of this idea by carrying out a field experiment in the context of the rice market in Bangladesh. We recruit professional rice buyers (middlemen) to act as judges in a rice competition by providing their quality rating and willingness to pay (WTP) for rice samples that we randomly associate with farmers bearing ethnic majority or minority names. First, we find that there is no ethnic difference in buyers' evaluation of rice quality. Second, we find that local buyers, who have local monopsony power, discriminate against ethnic minority farmers by expressing a lower WTP for their rice (2.7% less) relative to that of ethnic majority farmers. Third, we find that wholesale buyers, who face fierce competition in the marketplace, do not discriminate against ethnic minority farmers in terms of their WTP for rice. In terms of mechanisms, we show through a second lab-in-the-field experiment and survey information that local and wholesale buyers do not have different tastes for discrimination. This suggests that market competition can eliminate the discrimination of wholesale buyers.

Keywords: Discrimination, market competition, ethnicity, rice market, Bangladesh, field experiments.

JEL Classification: C93, J15, J43, J71, Q13, Z13

Suggested Citation

Siddique, Abu and Vlassopoulos, Michael and Zenou, Yves, Market Competition and Discrimination (April 27, 2020). Available at SSRN: https://ssrn.com/abstract=3586133 or http://dx.doi.org/10.2139/ssrn.3586133

Abu Siddique

Technical University of Munich ( email )

Am Essigberg 3
Straubing, 94315
Germany

HOME PAGE: http://https://sites.google.com/view/abusiddique

Michael Vlassopoulos

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Yves Zenou (Contact Author)

Monash University - Department of Economics ( email )

Australia

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

Research Institute of Industrial Economics (IUI) ( email )

P.O. Box 5501
S-114 85 Stockholm
Sweden

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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