Study: Skin Color Can Give Online Sellers Upper Hand

(June 1) -- As anyone will tell you, even a minor transaction on Craigslist is not just a negotiation between two parties, but a negotiation between the human instincts for bargain-hunting and self-preservation. Is the deal good enough to risk meeting a total stranger with a pocket full of money?

Two researchers at Stanford have taken this conundrum a step further by explicitly introducing race into the mix. Jennifer Doleac and Luke Stein recently published the results of their study investigating whether including photos of white, black or tattooed hands holding new iPod Nanos in online classified ads has an effect on the offers that prospective buyers make.

The short answer: yes. For a year, Doleac and Stein planted ads for iPods in several hundred sites across the country and then tracked the responses. On the whole, black sellers received 13 percent fewer responses and 17 percent fewer offers. Those who did receive an offer got 2 to 4 percent less than their white counterparts.

The researchers also noted that prospective buyers were 17 percent less likely to use their name in an e-mail to a black seller than to a white one.

Once all the bids came in for a listing, Doleac and Stein waited 48 hours, and then notified the highest bidder that his or her offer had been accepted. There was a twist, however: The buyer was told that the seller would be out of town, and was given the option of receiving the iPod via mail, instead of meeting in person. Would that be OK? Again, black sellers fared worse than whites.

"Buyers corresponding with black sellers exhibit lower trust," Doleac and Stein write. "They are ... 44 percent less likely to accept delivery by mail, and 56 percent more likely to express concern about making a long-distance payment."

The pair found that black sellers do badly in "thin" markets: areas where they face little competition for their wares. Sellers in more competitive markets, which would be more densely populated areas such as cities, tend to do about as well as their white counterparts. Blacks fare worst of all in racially isolated areas and in areas with higher property crime rates. In these instances, Doleac says in an e-mail interview, "buyers are using race as a proxy for negative things in those markets -- living in a bad/unfamiliar neighborhood, perhaps, or criminal tendencies."

But that's not to say that residents of more densely populated areas are as a whole able to look past the race of their sellers. Black sellers got 32 percent fewer offers in the Northeast than whites, compared with 23 percent in the Midwest and 15 percent in the South. Black sellers got 1 percent more offers than whites in the West.

In general, the sellers with visible tattoos fared about as poorly as the black ones.

Doleac says that using national sites like eBay should offset these phenomena for sellers, because competition is high and the system is set up in a way that doesn't require personal contact (or as much trust). But, she says, using the sites she and her colleague did for this study is valuable because they better approximate the sorts of transactions people carry out in their day-to-day lives.

The results of this study echo findings by other researchers, who have determined, among other things, that landlords are considerably less likely to respond to a query from a prospective renter with a name associated with racial or ethnic minorities. In that light, Doleac and Stein's findings aren't entirely surprising.

What is surprising, however, is the propensity for bartering they found amid Craigslist shoppers. "My best stories have to do with the trade offers we received from potential buyers," Doleac says, "for puppies, auto detailing, snakes, guns, drugs -- you name it."