Badges and Biases: Certifications, digital discrimination, and racial inequality
23 Sep 2022 (Fri)
9:00am-10:30am
via Zoom
Mr. Wyatt Lee, University of Toronto

Certifications are a popular form of third-party approval in markets. Many studies of digital marketplaces implicitly assume that certifications benefit sellers of all races equally. Yet, research on discrimination suggests that the benefits might differ between Black and White sellers. On the one hand, certifications may benefit Black sellers more than White ones by reducing buyers’ reliance on group stereotypes. On the other hand, White sellers may benefit more if biased buyers discount the value of Black sellers’ certifications. I argue that, in the context of certifications on digital platforms, the latter argument is more likely to apply because such certifications tend to convey ambiguous meanings and are thus susceptible to buyers’ biased interpretations. I investigate this prediction in three studies. First, longitudinal data on Airbnb hosts reveals that Superhost badges were associated with a larger increase in prices and bookings for White hosts than for Black hosts. Second, an incentivized experiment with Airbnb users shows that the benefits of a Superhost badge were larger for White than for Black hosts, partly because guests interpreted the badge as a less clear signal of excellence for Black hosts. However, these racial gaps disappeared when I reduced ambiguity by clarifying to guests the criteria for earning the badge. Finally, a survey of industry insiders suggests that many practitioners are oblivious to the potential of certifications to exacerbate racial inequality on digital platforms. This research has implications for understanding evaluation systems, racial inequality, status advantages, and the design of certifications.