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Men, Women, and Taxi Fare

(Photo: Martin Garcia)

A study on the taxi market in Lima, Peru examines price differences between men and women. Taxi prices in Lima are set by bargaining, and the market of sellers is extremely competitive. The authors initially found, surprisingly, that “men face higher initial prices and rejection rates.”

However, when the experiment was performed again with a strategic move, the discrimination disappeared:

Passengers in this study begin by rejecting a first taxi to send a signal of low valuation to a second (waiting) taxi which they then negotiate with. Despite passengers otherwise using an identical bargaining script, we find that negotiated outcomes at the second taxi are gender blind. The second taxi treats men and women the same.

The authors conclude:

One interpretation of our finding is that drivers in this market do not have preferences for the gender of the passenger that they are transporting. Another interpretation is that the competitive pressure and associated low earnings prevent drivers from expressing any bias they may have against a certain type of passenger.