The rise of online marketplaces raises the potential for markets that are both more efficient and less biased. Early research pointed to the arms-length nature and relative anonymity of online transactions as factors that might lead to less discrimination in online transactions. However, the extent to which this promise is realized depends on the design choices platforms make. As a growing share of markets and transactions have moved online, marketplaces have evolved and platform designers have sought ever newer ways to encourage trust between strangers. Platforms have made different design choices over time, across industries – and even within industries. These choices shape both the efficiency and inclusivity of markets.
When trust-building mechanisms facilitate discrimination
Breaking with design choices made by many earlier online marketplaces, platforms such as Airbnb made names and pictures of market participants salient before deciding whether or not to transact. While this was presumably intended to encourage trust and ease commercial exchange among strangers, it also opened doors for discrimination in online marketplaces. Research has now documented racial or ethnic discrimination in a variety of areas online, from labor markets to credit applications to housing. It is enabled by two notable features. First, markers of race or ethnicity – most obviously photographs, but also subtler indicators, such as names – can trigger conscious or unconscious discrimination. The second feature is increased discretion on the part of sellers over which buyers they transact with. Both are choices made by platform designers.