Ethnically Segmented Markets

Abstract

Races often collide in segmented markets where buyers belong to one ethnic group while sellers belong to another. This Article examines one such market: the retail of wigs and hair extensions for African Americans, a multi-billion-dollar market controlled by Korean Americans. Although previous scholarship attributed the success of Korean American ventures to rotating credit and social capital, this Article ascribes their dominance in wigs and extensions to collusion and exclusion, tactics scrutinized under antitrust.

This Article is the first to synthesize the disparate treatment of ethnically segmented markets in law, sociology, and economics into a comprehensive framework. Its primary contribution is to forge the concept of ethnically segmented and misaligned (“ESM”) markets, where buyers and sellers are ethnically distinct from one another.

ESM markets challenge entrenched paradigms in antitrust. In the wigs and extensions market, the endurance of Korean American retailers confounds conventional notions of market power, which is measured at the firm level. This market suggests that numerous in-group incumbents can compete intensely with one another but collaborate to stymie out-group insurgents.

Keywords: antitrust, wigs, hair extensions, ethnically segmented markets, African Americans, Korean Americans, market power, exclusion

JEL Classification: K21