The Customer Is Always Right: An Experiment on Discrimination by Customers

Abstract

Companies in a competitive market are incentivized to appeal to customer desires. Customers hold discriminatory preferences but may be reluctant to act on them for fear of feeling or appearing unjust. This paper tests a potential mechanism through which discrimination by customers arises in the marketplace, and provides experimental evidence that customers are more likely to reveal discriminatory preferences when they act on them indirectly by supporting biased companies rather than when they act on them directly. When customers indirectly hire workers for a stereotypically male task rather than directly, there is little change in the average proportion of females hired, but the distribution becomes more skewed towards males. The results suggest that the intermediary role of companies in a market can increase the propensity for customers to act on their discriminatory preferences. As a result, discrimination by customers may be a greater cause of marketplace discrimination than previously predicted.