Car Salesmen, Different Races, Different Prices
Malcolm Gladwell highlights a long-running dispute (of which I had been previously unaware) between himself and Steve Sailer over what it means that car dealers quote higher prices to black (and women) customers than to comparable white (and male) customers.
Gladwell believes it is obviously evidence of “unconscious racism” whereas Sailer argues that it is much more likely that car salesmen have learned over time that they can get more money on average out of blacks and women and therefore are discriminating against them as suckers, not out of bias.
While it’s not inconceivable that some combination of both explanations are true (or that one is true for some salesmen and the other true for other salesmen) the Sailer explanation strikes me as more plausible. He cites economist Robert Stonebraker, who notes:
Ayres and Siegelman [the authors of the study Gladwell relies on] conclude that statistical discrimination is the real culprit. Blatant bigotry is not the cause. Rather, dealers and salespeople use race and gender to make statistical inferences about the consumer’s sensitivity to price — what economists term price elasticity.
While dealers and/or salespeople may know little or nothing about a particular customer, they know quite a bit about statistical differences among races and genders. They know that women and African-Americans typically enter the showroom with less information and less proclivity to bargain. Although white males often salivate at the chance to lock horns with car dealers in a bargaining struggle, females and African-Americans may be unaware that bargaining is even possible. Ayres and Siegelman cite a Consumer Federation of America survey that discovered that many female respondents, and more than one-half of African-American respondents, believed that sticker prices were non-negotiable.
Richard Posner adds,
It would not occur to Gladwell, a good liberal, that an auto salesman’s discriminating on the basis of race or sex might be a rational form of the “rapid cognition” that he admires… [It] may be sensible to ascribe the group’s average characteristics to each member of the group, even though one knows that many members deviate from the average. An individual’s characteristics may be difficult to determine in a brief encounter, and a salesman cannot afford to waste his time in a protracted one, and so he may quote a high price to every black shopper even though he knows that some blacks are just as shrewd and experienced car shoppers as the average white, or more so. Economists use the term ‘statistical discrimination’ to describe this behavior.
At the larger level, Sailer contends,
Some of these guys have been selling cars for as long as you have been alive. And, believe it or not, they pay close attention not just to what makes the most money for themselves but to what works for other salesmen as well.
Further, if the salesman’s unconscious prejudice is costing the dealership money, his manager will make him highly conscious of it quickly, or the salesman will be out on the street.
One would think.
Aside from my agreement with Sailer about how markets work, I also find this bit of information from Stonebraker rather telling:
African-American buyers were charged the same price differentials by African-American dealers as they were by white dealers. Female customers were treated just as poorly by female salespeople as they were by male salespeople. Neither the race nor the gender of dealers and/or salespeople seemed to matter.
If black men are treating other black men worse than they are treating whites because of racial animus, it must be “unconscious,” indeed.
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