Are Auto Dealers Biased?

If you're black or a woman, you're at a big disadvantage in bargaining for a new car. That's the finding of a study by Ian Ayres and Peter Siegelman in the current issue of The American Economic Review.

Researchers sent 38 white males, blacks, and women, to bargain for 306 new cars at 153 dealerships in the Chicago area. Each white male buyer was paired with a black or woman who approached the same dealer at a different time presenting identical bargaining strategies and financial credentials.

The study found that the best deals were consistently offered to white males. Final offers to black males averaged $1,100 higher than prices asked from white males, while black females and white females were quoted prices $410 and $92 higher than white men.

Occasional sexist or racist remarks by dealers suggest that animus against women and blacks may have played a part in this pattern. But a bigger factor seems to have been sellers' beliefs that blacks and women tend to be poorer bargainers than white males. The study notes that both black and white dealers favored white over black buyers, for example, and consumer surveys indicate that blacks and women are more prone than white men to regard sticker prices as nonnegotiable.