Neighborhood reputation affects online sales

(Credit: Tim Bogdanov/Unsplash)

When online sellers seem to be from economically disadvantaged neighborhoods, they get fewer responses to their ads, report researchers.

“Advertisements identifying the seller as a resident of a lower-income neighborhood received significantly fewer responses than advertisements identifying the seller as a resident of a more affluent neighborhood,” says study author Max Besbris, a doctoral student at New York University.

“Where an individual resides thus plays a critical role in their success as participants in economic exchanges—which, of course, affects their ability to make a living.”

Besbris suggests that the reason for the lower response rate to sellers from disadvantaged neighborhoods might be “because buyers used residence to infer the seller’s race or ethnicity, economic status, trustworthiness, or dependability. There are plenty of characteristics that get ascribed to individuals based simply on where they live.”

iPhone 5 for sale

In their experiment, the researchers investigated the effects of neighborhoods—determined to be either economically advantaged or disadvantaged—on responses to advertisements posted for used iPhone 5s in 12 cities.

The study used a large national online classified market where sellers post ads based on city and commonly list their neighborhood as well as the desired location for the transaction.

The study identified disadvantaged and advantaged communities by aggregating census data on racial composition and poverty to Zillow neighborhood boundaries, which define neighborhoods in US cities by name.

The researchers cross-referenced Zillow neighborhood names with frequency of search results in news articles on LexisNexis to confirm that they are commonly used neighborhood names and that the selected neighborhoods are generally portrayed as either advantaged or disadvantaged.

The researchers placed two advertisements per week in each city over a 3-4 day period, with price controlled to match regional marketplaces. Researchers randomly designated the sellers for each ad, posting as either residing in a disadvantaged or advantaged neighborhood, as well as the desired meeting place, either the seller’s neighborhood or a high-traffic area of the city (e.g., downtown).

‘Perceptions, true or false’

The results showed that advertisements from disadvantaged neighborhoods received approximately 16 percent fewer responses than did advertisements from advantaged neighborhoods. Moreover, this disparity was greater—approximately 21 percent fewer responses—for black, disadvantaged neighborhoods. However, there was no discrepancy for disadvantaged neighborhoods that were majority Latino.

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The researchers believe this study demonstrates that the perceptions other people hold affect the opportunities individuals encounter. Besbris explains that it is not merely the existing economic conditions within a neighborhood that affected residents.

“In this study, even the perceptions, true or false, that potential buyers had of a neighborhood influenced their likelihood to respond to an ad, and thus limited the economic opportunities of the seller,” he observes.

The study included the following cities: Atlanta, Baltimore, Boston, Chicago, Los Angeles, Philadelphia, Phoenix, San Antonio, Seattle, Washington, DC. In addition, the researchers considered two New York State boroughs—Manhattan and Brooklyn—as separate geographic entities.

The William T. Grant Foundation partially supported the work, which appears in the Proceedings of the National Academy of Sciences.

Source: NYU