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Measuring Racial Discrimination
1974), obtaining a taxicab (Ridley et al., 1989), preapplication behavior by lenders (Smith and Delair, 1999; Turner et al., 2002a), and home insurance (Squires and Velez, 1988; Wissoker et al., 1997).
In an example involving automobile purchases, Ayres and Siegelman (1995) sent 38 testers (19 pairs) to 153 randomly selected Chicago-area new-car dealers to bargain over nine car models. Testers bargained for the same model (a model of their mutual choice) at the same location within a few days of each other. In contrast with the common paired-testing design, pair membership was not limited to a single pair; instead, testers were assigned to multiple pairs. Also, testers did not know that the study was intended to investigate discrimination or that another tester would be sent to the same dealership. Testers were randomly allocated to dealerships, and the order of their visits was also randomly assigned. The testers were trained to follow a bargaining script in which they informed the dealer early on that they would not need financing. They followed two different bargaining strategies: one that depended on the behavior of the seller and another that was independent of seller behavior.
Ayres and Siegelman found that initial offers to white males were approximately $1,000 over dealer cost, whereas initial offers to black males were approximately $1,935 over dealer cost. White and black females received initial offers that were $1,110 and $1,320 above dealer cost, respectively. Final offers were lower, as expected, but the gaps remained largely unchanged. Compared with white males, black males were asked to pay $1,100 more to purchase a car, black females were asked to pay $410 more, and white females were asked to pay $92 more. These examples of evidence gleaned on market discrimination show the value of paired-testing methods for studying discrimination.
In Box 6-5, we provide an example of a field experiment on job hiring (Bertrand and Mullainathan, 2002) that emulates some of the best features of laboratory and audit studies. This study uses a large sample and avoids many of the problems of audit studies (e.g., auditor heterogeneity) by randomly assigning race to different résumés. It is a particularly good example of the possibilities of field study methodology to investigate racial discrimination.
Limitations of Audit Studies
Ross and Yinger (2002) discuss two main issues raised by researchers concerning the use of paired-testing methodology. They are (1) the accuracy of audit evidence and (2) its validity, particularly with respect to the target population. It is also worth noting that such studies typically require extensive effort to prepare and implement. They can be very expensive.