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Friday, July 29, 2005

How the Death of SUVs Reduced Race Discrimination at GM dealerships

Ian Ayres

Usually African-Americans get hurt during economic downturns. They are last hired and first fired and the standard deviation on cyclical black unemployment is larger than for whites.

But somewhat surprisingly GM's economic crisis may have caused it to adopt a more uniform pricing strategy that reduces dealer's opportunity for discrimination. The ThirdWay Ad Blog argues that reducing racialized mistreatreatment concerns for consumers is an intended part of the campaign:

[The General Motors Employee Discount "You pay what we pay" ads have] been
the most successful promotion in the car industry for some time and may have
single-handedly given General Motors and its embattled CEO Rick Wagoner some
breathing room.

There is no question that General Motors is offering rock-bottom pricing,
but it is the way they are doing it that's important. The last time the industry
went through a wave of price cutting it was done with 0% apr financing.

This price promotion is smarter because it fixes one of the largest
problems in the industry - one that is well-understood, has been studied in
controlled tests and one that GM itself was the first to address years ago. The
problem is price discrimination.

When asked, most people will say that if you are a woman or black and walk
into a car dealership, you will have difficulty getting the same price as a
white man. In fact, this was shown quantitatively in a study by Ian Ayres called
Pervasive Prejudice? Unconventional Evidence of Race and Gender Discrimination
(Chicago:University of Chicago Press, 2001).

The power of the "Employee Discount for Everyone" is not in the word
'discount' - it's in the last word 'Everyone.' In fact, the spot announcing this
discount is weighted towards non-white male speakers. Of the 7 spokespeople in
the spot (all employees), only two are white men. There are two more men - one
Hispanic and one Black and three women, one white, one Asian and one Black.
While this is not unusual in advertising in general, it serve a very specific
purpose here - to underline the world 'Everyone.'

In Pervasive Prejudice, I discussed a similar kind of ad that Saturn ran a few years ago. In a voiceover of photographs, a man remembers as a boy going with his dad to buy a car and how his dad felt he had been mistreated. That's why the man is now so proud to sell Saturn cars. Race is never mentioned but all the photographs are African Americans.

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