Idea in Brief
The Problem
Online marketplaces such as eBay, Uber, and Airbnb have the potential to reduce racial, gender, and other kinds of discrimination that affect transactions in the off-line world. But recent research shows that the opposite has occurred.
The Reason
Early platforms kept the identities of buyers and sellers relatively anonymous. But the addition of photos, names, and other means of identification to listings has inadvertently encouraged discriminatory behavior.
The Answer
To create markets that are both efficient and inclusive, platform designers need to be mindful of the potential for discrimination and open to experimentation as they make choices about automation, algorithms, and the use of identifying data.
In the late 1980s, law professors Ian Ayres and Peter Siegelman set out to learn whether blacks and women got the same deals as white men when buying a new car. They trained 38 people—some white and some black, some male and some female—to negotiate a purchase using a fixed script, and uncovered disturbing differences: Across 153 dealerships, black and female buyers paid more for the same cars than white men did, with black women paying the most—on average, nearly $900 more than white men. Although the findings weren’t a surprise to most people, least of all to blacks and women, they were a compelling demonstration of just how discriminatory markets can be.
