The effect of competition on discrimination in online markets—Anonymity and selection

Empirical studies show that discrimination by identity found in offline markets also prevails online. This paper reveal that in a competitive market, buyers that intend to discriminate exist but they are prevented from influencing the market outcome. To this end, we construct a field experiment on eBay, where half of the sellers disclose their names in their usernames while the other half do not. eBay, however, automatically discloses the seller’s names to the buyer after the auction. In the anonymous auctions, winning bidders thus learn the identity of the seller after the auction ends, and here we find buyers to discriminate against sellers with foreign-sounding names by leaving them feedback less often. However, there is no such discrimination in feedback provision when the seller name was known to the buyer before the auction. When bidders know the names of the sellers, the bidders with animus towards individuals with specific names can select out of auctions from these sellers, leaving winners that do not discriminate. One would expect that the auctions of for example sellers with foreign-sounding names would receive fewer bidders and thus lower auction prices. However, we observe no such differences: there are no statistically significant differences in the number of bids or auction prices received by sellers with foreign or domestic sounding names.