Racial Disparities in Taxicab Tipping a Presentation of a Working Paper by
Ian Ayres, Frederick E. Vars, Nasser Zakariya
Given By Ian Ayres of Yale Law School

I'm blogging live from Professor Mitch Polinski's Law and Economics Seminar at Stanford Law School. I'll update as new info comes in.

This is the first paper on whether consumers discriminate against sellers on the basis of race. The authors' point - African Americans receive less tips as drivers, give less tips as passengers, and this is not affected if the both the driver and the passenger happen to be African American. Their data says that whites give an average tip of 26.7% to white drivers while giving only a 17.9% tip to black drivers. Flipping the races, he found that if the passenger was black, the tip was only 11.0% if the passenger was white, while 7.4% if the passenger was black. There is also a racial disparity in the stiffing rate. This stiffing disparity on the driver side represents a third of the discrimination against black drivers.

Other things in the data (that nobody will see in the paper). Discrimination against older drivers. They get less, even though older passengers get more. Wishes he got more stats on whether the drivers were native born, he only got that data on nine of the twelve drivers. Also didn't ask for whether there was a receipt or not (wishes he had - for if it is a receipt, somebody else is paying for the tip)

Alternative Hypotheses
1) Censoring - Meaning undereporting. If they made up reports then this could just reflect the driver's respective beliefs. Ayres defends against this that drivers can be quiet about tipping - afraid of tax man, move in different social circles from each other.
2) Clustering on Driver Reduces Signicance of Consumer Discrimination Result

One Professor in the room asks if there is a selection bias? Suppose that black cab drivers if they wait in a particular part of town, not the train station. The lower quality then go to the train station - where I am assuming Ayres got his data. This prof asks Ayres why isolate for location? Ayres responds that he has tried to control for quality of service. He doesn't think (but doesn't go into here why) service is a credible explanation of the effect.

Wow...Richard Epstein just walked into the room......he's joining half the law school faculty in this small room....quite the all star cast (Joe Bankman, Rabin, Banks, Cuellar, Kennedy Government school guy, John Donahue, etc.)

Fares in New Haven are done by meters, cabs are rented by drivers on a weekly basis. Fares set by the city. Two dollars when you get the cab, and 25 cents for each increment.

Asked if controled for length of trip (do white drivers farther/not farther than black drivers)? Answer - higher tips on shorter drives. About to test whether the black drivers go farther than white drivers or not.

Estimates that Black Drivers earn 7% less per ride than White Drivers. Doesn't have data on the hours driven.

Now to the good stuff - POLICY IMPLICATIONS
Wants to MANDATE a decal stating - Tip Included. Doesn't want Tip FORBIDDEN decal - because research suggests the latter leads to widespread disobediance. Feels that this would get less passenger discrimination. Epstein asks if this would cause a "disparate impact" (would price out black passengers) and hence be potentially unconstiutional. Ayres admits that there is a disparate impact, and that this could be an issue. Anyway he feels that "this would reduce consumer discrimination against black drivers and reduce driver discrimination against black customers." Oh yeah, could reduce the stress of trying to figure out how much to tip.

Zacarias, one of the coauthors, have had Egyptian cab drivers refuse to let him (an egyptian) tip as a showing of racial solidarity. This shows that one of the effects could be a sign of identification, not hostile racism. One girl emailed Ayres, saying that she, as an asian, tip more to put on a good faith. Other African Americans have emailed him saying that they will tip more to avoid a negative image of their race from being formed. Professor Polinski suggests that the person should have taken a $10 bill, ripped in half, to signal that the person is not cheap.

Others are thinking that Race could be the proxy of whether there will be given a tip...explaining the effect.