The Unintended Consequences of Raising Awareness: Knowing About the Existence of Algorithmic Racial Bias Widens Racial Inequality
Posted: 23 Oct 2021
Date Written: July 23, 2021
In May 2016, a series of news articles on algorithmic racial bias went viral and triggered a nationwide outrage on social media, raising public awareness of the existence of algorithmic racial bias. The new public awareness raised an important question: How does awareness of the existence of racial bias in some algorithms influence the disadvantaged group’s receptivity to unrelated algorithms that are unbiased (i.e., race-blind) and offer significant financial, education, or health benefits? The current research is the first attempt to investigate this question. An analysis of an Airbnb dataset reveals that, before the 2016 media coverage of algorithmic racial bias, Black hosts were less likely than white hosts to use Smart Pricing (i.e., an unbiased pricing algorithm with a demonstrated financial benefit); after the media event, the racial gap in Smart Pricing usage widened by 61.2%. A controlled experiment further demonstrates the mechanism: awareness of algorithmic racial bias differentially affects the expected financial benefits of Smart Pricing along racial lines, increasing the expected benefits of Smart Pricing among white hosts and reducing the expected benefits of Smart Pricing among Black hosts. Theoretically, this research contributes to the nascent literatures on algorithmic bias and algorithm aversion and the classic literature on judgment and decision making. Practically, it offers important implications for policy makers, firms, and media outlets that wish to prevent the public’s awareness of certain algorithmic biases from spilling over to algorithms that are unbiased and beneficial.
Keywords: Algorithmic Bias, Algorithmic Racial Bias, Airbnb, Smart Pricing, Algorithm Usage, Overgeneralization
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