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.
It’s racism. It has to be. After all, Malcolm Galdwell has written books, so who are we to argue with him?
I guess there will always be assumed information that you think the rest of society knows. I have bought 5 new cars and I paid less than sticker on all of them. I assumed people understood this was the dealers opening bid price and that the dealer has substantial room under the sticker price to deal from. While market conditions on a particular make may mean temporary premiums over the sticker price (which would raise the question to me as to why I wanted that make versus one of the other imminently substitutable makes) the rule of thumb should be to negotiate.
And another hint, always negotiate based on “drive away” cost. Any taxes, dealer prep, extended warranty, etc should have been included in the negotiated price, otherwise you can get a nasty surprise.
I have only bought two new cars, both in the Internet era. In both cases, I negotiated up from the invoice price knowing exactly what the dealer costs were. The deals were quick, fair, and to everyone’s satisfaction.
I actually think salesmen prefer knowledgeable consumers, which cuts down on wasted time and underlying mistrust.
James,
Your doing research prior to visiting the dealership is racist. One of the school districts arguing that they should be able to sort their students based on skin color had ‘”having a future time orientation.” (planning ahead)’ as an example of ‘cultural racism’. So since you planned ahead, you committed an act of ‘cultural racism’.
Now in atonement you might think you should go into the dealership and hand them several large bags of cash. But since the dealers are racist, this would not be acceptable. Instead, I would suggest you send me the large bags of cash to atone for your racism.
Buying cars is a skill, like any other.In sports, the best SCORE goes to the most talented and practiced player. When buying cars, the best PRICE goes to the most talented and practiced buyer. salesmen have GREEN egos.
This is some of the most ridiculous psycho-babble I’ve ever heard. First, there is zero evidence that blacks do any less research than whites when buying a vehicle. I think that many of you are mistaking price paid for price quoted. When I walk into a store and an item is quoted at a $500 markup, I have zero to do with that. Secondly, none of you seem willing to take your market principle a bit farther and suspect that maybe just maybe even African-American dealers realize that white dealership will establish the market(as they have a disproportionate share of it) for blacks at a higher rate, and the only rational thing to do is to grab those extra profits for yourself despite sharing the same skin tone.
I guess the funniest thing is how the comments laugh at the notion of racism, but then all of the comments seem to contain these thoughts about the “vast” superiority of the white man in haggling as if that is some trait handed down in your genetic code.
If you don’t like the price just walk away. When you do the price always gets better.