The basic logic behind a paired test for discrimination is fairly straightforward. Two testers, one white and one minority, are matched on characteristics that are relevant to the market transaction being considered. Each tester is then sent to inquire about a market transaction under fairly controlled and highly similar circumstances. For example, in the case of rental housing, the two testers would be similar in age and physical appearance, assigned the same income and family status, and sent to inquire about the same rental unit and/or to the same rental agency using a common protocol. The result of each tester's inquiry and the treatment experienced are reported and documented in isolation from the other tester. The two testers' experiences are combined and compared at a later date by an independent third party.
Any differences between the paired testers' experiences is considered evidence of adverse or differential treatment. Paired testing is designed to measure the level or frequency of adverse treatment discrimination in a given market, where adverse treatment discrimination is defined as instances in which the treatment of an individual is adversely affected by his or her race, ethnicity, or other legally protected characteristic. Paired testing measures the level or frequency observed based on a specific protocol for sampling the market. Therefore, the testing cannot measure the actual impact of discrimination on individuals in the marketplace. For example, if real estate agents steer minority home buyers away from discriminatory lenders, a paired test of the mortgage market will not capture the mitigating effect of this behavior.
In addition, paired testing will not uncover the existence of adverse impact discrimination in a given market. Adverse impact discrimination is defined as follows. A firm or a set of firms in a market engages in many economic transactions, and for each transaction there is a relevant population of reasonable candidates. Adverse impact discrimination occurs when the policy of one or a number of firms places the minority group within the relevant population at a disadvantage relative to the majority even when the policy is applied uniformly, and this policy cannot be justified by business necessity. Naturally, this type of discrimination cannot be detected by testing because the policy is applied uniformly, and systematic racial differences in treatment may not exist.