The selected video is a news report called Car Shopping Secrets − Do Men or Women Pay More? It is about gender-based price discrimination in the automobile industry. According to researchers from Yale University, women are usually charged more than men when making car deals (Fix, 2015). This type of pricing disparity may be a manifestation of the social inequality in a broader sense. Since the given phenomenon has multiple implications including the economic and social ones, its investigation is of great interest. However, it is important to understand all pros and contras of the issue because the rates of unequal pricing incidence could have changed over time. By comprehending multiple facets of the problem, it will be possible to undertake appropriate actions to make favorable changes.
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In the video, a female and a male reporter visited ten same car dealers under disguise to identify if women are indeed charged more. The results were surprising as the findings obtained by researchers from Yale were not confirmed through this experiment. Four dealerships provided equal prices for both reporters, three dealers gave the female reporter a higher price, and three others gave a higher price to the male reporter. What is more important is that the prices for the man were on average $3,100 higher than for the woman.
It means that car dealers may now have a different perception of female purchasers and acknowledge the significance of their role in making buying decisions. At the same time, the reverse gender-based discrimination can be observed as men can be charged more than women.
A few of Mankiw’s economic principles can be applied to the case. The first one is that people face trade-offs. The video shows that there is a trade-off between the fair prices for females and discriminatory pricing for males. While for a long time, the attainment of equal pricing for people from different demographic backgrounds could be regarded as a goal, the reduction of female price discrimination could have led to an increase in the discriminatory pricing for other demographic groups as car dealers still want to increase profits. The second applicable principle is as follows: markets are a good way to organize economic activity.
The principle suggests that resources can be distributed through prices, which, in their turn, are determined through buyer-seller interactions. Based on this, the fairer car prices for women may indicate a greater accessibility of the given population group to this type of resources, as well as their greater involvement in the economic activity within the market.
As stated by D’Haultfoeuille, Durrmeyer, and Février (2014), gender is not the only characteristic upon which car retailers may discriminate prices nowadays: age, general appearance, car model, etc. can motivate dealers to give higher/lower prices to individuals as these features help guess the overall level of income. Pricing discrimination can benefit large car manufacturers and even some consumer groups that have higher welfare surplus gain because of it (middle-age, higher-income individuals). Nevertheless, pricing disparities inevitably induce financial losses to other consumers, e.g., lower-income, older adults (D’Haultfoeuille et al., 2014).
According to Chandra, Gulati, and Sallee (2013), women’s bargaining power has increased along with the improvement in their educational and professional statuses. As a result of the changes, individual characteristics and negotiation abilities started to play a decisive role in determining the final price of a deal. These findings are consistent with the observations made in the video.
It is possible to say that the situation with gender-based pricing discrimination is gradually improving. The change can be defined by the overall developmental trends in social, economic, and political environments. It is apparent that the situation in the macro-environment is interdependent with the way dealers set prices. Either way, the example of the automobile market shows that as pricing strategies become modified, more diverse individuals start to participate in economic activities.
In this situation, individual characteristics of consumers obtain greater significance as retailers now pay more attention to a perceived level of income than gender when selecting a price. Thus, the ability to negotiate and the level of knowledge about the object of purchase can help win a good deal in the present-day market.
Chandra, A., Gulati, S., & Sallee, J. (2013). The gender gap in price negotiations: Evidence from new car sales. Web.
D’Haultfoeuille, X., Durrmeyer, I., & Février, P. (2014). Automobile prices in market equilibrium with unobserved price discrimination. Web.
Fix, L. (2015). Car shopping secrets − Do men or women pay more?. Web.