Racism, sexism and salesman (Gladwell)
September 7th, 2007 | Published in Morality, Psychology, Race, Quotes, Culture | 4 Comments
All other things being absolutely equal, how does skin color or gender affect the price that a salesman in a car dealership offers?
The results were stunning. The white men received initial offers from the salesmen that were $725 above the dealer’s invoice…. White women got initial offers of $935 above invoice. Black women were quoted a price, on average, of $1,195 above invoice. And black men? Their initial offer was $1,687 above invoice. Even after forty minutes of bargaining, the black men could get the price, on average, down to $1,551 above invoice. After lengthy negotiations, [the] black men still ended up with a price that was nearly $800 higher than [the] white men were offered without having to say a word.
–Malcolm Gladwell, Blink (2005), p. 93
September 7th, 2007 at 6:29 pm (#)
All other things being absolutely equal, how does skin color or gender affect the price that a salesman in a car dealership offers?
But all other things aren’t equal. The salesmen have experience guessing who will be tougher negotiators, who will be more likely to be wasting their time, and so forth. They have to not only try to maximize the sale price, but minimize the time spent in negotiation. And they have to factor in the probability of the customer walking away in the process without closing the sale. There are many, many factors, and a good salesman (that is, good at maximizing profit) probably juggles dozens of them in his head without even thinking specifically about each one.
It would be very surprising to me if every demographic group that you could slice customers into acted absolutely equally on these factors. So all other things are not “absolutely equal”.
To figure our what was really going on, you’d have to do a reverse sort of study. Use real customers and ringer salesmen. See if offering each group the same starting price in negotiations is the best strategy, or even a profitable enough strategy to stay in business.
If the salesmen in the quoted study (from the Blink book) were motivated by simple irrational racism, then their strategy should be suboptimal. It should be costing them profits. This should be provable one way or the other, but the experiment that we hear about in this quote isn’t good enough to prove things either way.
September 7th, 2007 at 6:38 pm (#)
They did try pretty hard to make things equal — or at least, as equal as possible. They all had the same education, were dressed in the same style, etc.
But of course this isn’t completely objective — yet it does show us that there is a significant bias.
September 7th, 2007 at 8:22 pm (#)
They did try pretty hard to make things equal — or at least, as equal as possible. They all had the same education, were dressed in the same style, etc.
Oh I’m sure the test buyers were as equal as possible. But the real customers in the salesmen’s past experience probably didn’t behave in equal ways across all demographic groups. Some groups were probably tougher negotiators than others, some were probably more likely to be interested in cars that they couldn’t afford, etc. There are probably cultural differences in buying and negotiating behavior that have nothing to do with the salesmen’s racial attitudes.
But of course this isn’t completely objective — yet it does show us that there is a significant bias.
Sure, but what kind of bias, and what does it mean? As long as car sales are a negotiation game, I suspect that “unbiased” behavior is a pipe dream.
It would probably be economically irrational for salesmen to robotically perform the same actions with each customer, from a sales standpoint. I’ll wager that in a reverse study where the customers were real and the salesmen the scripted ones, that this would be less profitable than using different negotiating strategies with different groups.
My guess based on your quoted study is that in the salesmen’s previous experience, white men may have been (on average) the toughest negotiators, white women next toughest, etc. And that the salesfolk were making a subjective judgment to balance negotiation time against likely final purchase price.
Just a guess, but one that could be empirically investigated.
If, on the other hand, as we’re probably supposed to think, the salespeople were just irrationally trying to charge people that they didn’t like or respect more money, then they would actually be hurting sales. This could be measured.
September 7th, 2007 at 8:35 pm (#)
Oh, I’m not saying stereotypes are wrong. Everyone has them and it protects us and helps us make a little sense out of the world. I’m sure these stereotypes are based on reality in some way. That is, stereotypes can be helpful — but as this shows, they can also be unhelpful/incorrect.