It appears that some online merchants are committing a form of organizational discrimination through their pricing practices. People in lower-income areas are paying more for products than those in higher-income areas. As we know, neighborhood, income, and race are correlated, and so African Americans, Latinos, and other minorities could be generally paying more (along with their low-wage white counterparts). This remains to be investigated.
The pricing scheme was investigated recently by the Wall Street Journal along with researcher Ashkan Soltani. See the article here.
A Wall Street Journal investigation found that the Staples Inc. website displays different prices to people after estimating their locations.
The Journal identified several companies, including Staples, Discover Financial Services, Rosetta Stone Inc. and Home Depot Inc., that were consistently adjusting prices
The Journal tested to see whether price was tied to different characteristics including population, local income, proximity to a Staples store, race and other demographic factors. Statistically speaking, by far the strongest correlation involved the distance to a rival’s store from the center of a ZIP Code. That single factor appeared to explain upward of 90% of the pricing pattern.
In the Journal’s examination of Staples’ online pricing, the weighted average income among ZIP Codes that mostly received discount prices was roughly $59,900, based on Internal Revenue Service data. ZIP Codes that saw generally high prices had a lower weighted average income, $48,700.
On the methodology:
The differences found on the Staples website presented a complex pricing scheme. The Journal simulated visits to Staples.com from all of the more than 42,000 U.S. ZIP Codes, testing the price of a Swingline stapler 20 times in each. In addition, the Journal tested more than 1,000 different products in 10 selected ZIP Codes, 10 times in each location.
The Journal saw as many as three different prices for individual items. How frequently a simulated visitor saw low and high prices appeared to be tied to the person’s ZIP Code. Testing suggested that Staples tries to deduce people’s ZIP Codes by looking at their computer’s IP address. This can be accurate, but isn’t foolproof.
Tags : discrimination, internet
Categories : Classes, Social Psychology, Stereotyping and Prejudice, Weblogging