Thursday, January 24, 2013

Bargaining and Taxi-Cabs: three papers

There are three papers that have recently used taxicabs, or Autorickshaws, as it is, to study bargaining and discrimination in prices among various customers. Well, three I have been aware of, at least...

These are (in alphabetical order)

Loukas Balafoutas, Adrian Beck, Rudolf Kerschbamer  and Matthias Sutter in  "What Drives Taxi Drivers?
A Field Experiment on Fraud in a Market for Credence Goods". The abstract reads
"Credence goods are characterized by informational asymmetries between sellers and consumers that invite fraudulent behavior by sellers. This paper presents a natural field experiment on taxi rides in Athens, Greece, set up to measure different types of fraud and to examine the influence of passengers’ presumed information and income on the extent of fraud. We find that passengers with inferior information about optimal routes are taken on detours of almost double length, while lack of information on the local tariff system increases the likelihood of manipulated bills by about fifteen percentage-points. Passengers’ income seems to have no effect on fraud."

Marco Castillo, Ragan Petrie, Maximo Torero & Lise Vesterlund have a paper on "Gender Differences in Bargaining Outcomes: A Field Experiment on Discrimination" that has been around for a long time, but now is forthcoming in the Journal of Public Economics.
I blogged about it before, but, here is abstract, once more:
"We examine gender differences in bargaining outcomes in a highly competitive and commonly used market; the taxi market in Lima, Peru. We find that men face higher initial prices and rejection rates. To explain the inferior treatment of men we conduct an experiment where passengers send a signal on valuation before negotiating. The signal eliminates gender differences and the response is shown only to be consistent with statistical discrimination. In separating the role of statistical and taste-­based discrimination within the market, we address the concern that discrimination may be implicit"


Daniel E. Keniston: “Bargaining and Welfare: A Dynamic Structural Analysis of the Autorickshaw Market”  where the abstract reads:
"Bargaining for retail goods is common in developing countries, but rare in the developed world. The welfare implications of this di fference are theoretically ambiguous if bargaining is a low cost form of price discrimination, it may lead to greater trade and welfare and even approximate the optimal incentive compatible outcome. However, if bargaining imposes large utility costs on the participants, then a fixed price may be preferable. I develop the tools to resolve this question, specifying a mechanism design problem adapted to the context of bargaining, and developing a dynamic structural estimation technique to infer the structural parameters of the market. I then apply these techniques to the market for local autorickshaw transportation in Jaipur, India, using data I collected over 2008-2009."

It seems such a specialized area, but apparently the authors don't know of each others work, only one paper cites the other two...

1 comment:

  1. Hi Muriel and Readers,

    I also have a paper that utilizes taxis to study bargaining, specifically whether elections affect bargain outcome discrimination on ethnic and partisan lines in Ghana. I do not cite the others, although I have a small excuse as a political scientist for being unaware of the economics literature! Here is the title and abstract below.

    -Kristin Michelitch

    Does Electoral Competition Exacerbate Interethnic or Interpartisan Economic Discrimination?
    Evidence from a Market Price Bargaining Experiment in Ghana

    In weak-state settings of Africa and other low-income regions, sharing group membership has been found to facilitate economic activities such as local public goods provision and long-distance trade. Meanwhile, political competition has been found to shape the structure and salience of ethnic and partisan group memberships. This study therefore questions whether political competition has the power to exacerbate discrimination between ordinary citizens on ethnic and/or partisan lines in perhaps the most commonplace yet consequential economic activity in sub-Saharan Africa: market price bargaining. Field interviews form the basis of a model expressing the logic of exchange and the role of group membership in a weak-state, low-income setting. By conducting a series of field experiments at three points in time around Ghana's 2008 National Elections, the research reveals that individuals bargain lower prices from coethnics than non-coethnics regardless of temporal proximity to the election. However, at election time prices bargained from non-coethnics diverge based on partisanship - copartisan prices are signicantly lower than non-copartisan prices.