Gender differences in bargaining outcomes: A field experiment on discrimination

Relying on a commonly used fixed-offer bargaining script we examine gender differences in bargaining outcomes in a highly competitive and frequently used market: the taxi market in Lima, Peru. Our bargaining script secures that only the seller can change prices and terminate negotiations, thus we are able to examine differences in the seller's entire path of negotiation and in the reservation price at which they are willing to trade. We find that male and female passengers who use the same bargaining script are not treated equally. Men face higher initial prices, final prices, and rejection rates. These differences are consistent with male drivers being more reluctant to give-in to demanding negotiations by male passengers, and with male passengers being perceived as having high valuations. To identify whether taste-based or statistical discrimination drives 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. Thus in the limiting case of a highly competitive market with experienced traders, we do not find evidence of taste-based discrimination, the differential observed is however consistent with statistical discrimination.

► We examine gender differences in bargaining outcomes in a competitive taxi market.
► Male passengers face higher initial prices, final prices, and rejection rates.
► The source of discrimination is identified in a signaling treatment.
► Men and women are treated the same when they signal that they have low valuations.
► Statistical discrimination drives the differences seen in this competitive market.