To Insure Prejudice: Racial Disparities in Taxicab Tipping

Abstract

It has become increasingly common to test whether sellers in retail markets discriminate against buyers. But this Essay is one of the first efforts to test the other side of the market. It examines whether retail consumers discriminate against sellers on the basis of the sellers' race. Even though Gary Becker long ago understood that consumers' "taste[] for discrimination" could cause sellers to discriminate against other customers—for example, leading restaurant owners to maintain racially segregated lunch counters—almost no one has tested whether consumers' taste for discrimination might be directed at a seller's race itself (or the race of a seller's employees). This failure to test is unjustified. Tests of consumer-side race discrimination are just as feasible as seller-side testing. Consumer price discrimination might be observed in car and house negotiations and auction markets (including online markets such as eBay). Of course, the ability of consumers to discriminate in terms of pricing is often severely constrained. Outside of auction and negotiated-pricing regimes, consumers are generally presented with a fixed price.