Price discrimination by language: Field experimental evidence from a shopping mall |
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| Institution: | 1. Department of Economics, College of Social Sciences, Seoul National University, Building 16, Room 633, Seoul, Republic of Korea;2. IZA (Institute for the Study of Labor), Germany;3. Korea Culture & Tourism Institute, Republic of Korea;1. Department of Resource Economics at the University of Massachusetts Amherst, United States;2. Business Economics Consulting LLC, MI, United States;1. College of Business, City University of Hong Kong, Hong Kong, China;2. Beedie School of Business, Simon Fraser University, Canada;3. Sauder School of Business, University of British Columbia, Vancouver, Canada;1. Vrije Universiteit Amsterdam and University of Groningen;2. Yale School of Management |
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| Abstract: | To investigate whether foreign shoppers are discriminated against, we conduct a field experiment at a large shopping mall. We employ 56 female foreigners speaking 11 different languages and 7 Korean natives and collect data on total 2267 store visits. To test price discrimination based on differential search costs, we randomly select buyers to send a signal of lower search cost. Results show that negotiation and signaling induce sellers to lower their price offers. Our experimental findings, combined with auxiliary survey data from foreign visitors, suggest that sellers use the language of buyers as a proxy for the distribution of reservation values. |
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