Hostname: page-component-848d4c4894-8bljj Total loading time: 0 Render date: 2024-07-03T01:33:27.328Z Has data issue: false hasContentIssue false
  • English
  • Français

Market Discrimination against the Poor and the Impact of Consumer Disclosure Laws: The Used Car Industry

Published online by Cambridge University Press:  01 July 2024

Kenneth McNeil ,
John R. Nevin ,
David M. Trubek  and
Richard E. Miller
Get access Rights & Permissions [Opens in a new window]

Abstract

The poor pay more than the non-poor for many consumer products, and this disparity seems to be ignored by such consumer protection regulation as disclosure laws. Indeed, several lines of argument suggest that the poor will not benefit from disclosure regulation either because they lack the ability to use information effectively (“market irrationality”) or because they are restricted to particularly flawed markets and products (“separate markets/products”).

This paper examines income stratification in the used car markets in Wisconsin, Iowa, and Minnesota. We found that the poor did pay more for used cars, got less redress for defects discovered after purchase, and were less satisfied and more likely to believe something was misrepresented. Differences in product quality did not account for these results because the patterns persisted even after the model, age, and price of the purchased vehicles were held constant. Further, no evidence was found for “market irrationality” among the poor. No income differences were seen in buyers' discovery of defects before or after purchase, and low-income buyers complained at higher rates, albeit with less success, than did higher-income buyers. Furthermore, the adoption of disclosure regulation in Wisconsin did not increase or decrease price discrimination against the poor. These findings point to the need for more research on the causes of price discrimination and more attention to the problems of the poor in the design and implementation of consumer protection regulations.

Type
Research Article
Information
Law & Society Review , Volume 13 , Issue 3 , Spring 1979 , pp. 695 - 720
Copyright
Copyright © 1979 Law and Society Association.

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

The research reported here was partially supported by funds granted to the Institute for Research on Poverty at the University of Wisconsin-Madison by the Department of Health, Education and Welfare, pursuant to the provisions of the Economic Opportunity Act of 1964; and by NSF Grant SOC 7622234, which provided funds for a broader study of consumer protection and the automobile industry. The conclusions expressed herein are those of the authors.

References

ANDREASON, Alan R. (1975) The Disadvantaged Consumer. New York: Free Press.Google Scholar
ANDREASON, Alan R. and Arthur, BEST (1977) “Consumer Response to Unsatisfactory Purchases: A Survey of Perceiving Defects, Voicing Complaints, and Obtaining Redress,” 11 Law and Society Review 701.Google Scholar
BARTON, Babett B. (1976) “Private Recourse for Consumers: Redress or Rape?” in Katz, Robert (ed.), Protecting the Consumer Interest: Private Initiative and Public Response, 183. Cambridge, Mass.: Ballinger.Google Scholar
CAPLOVTTZ, David (1967) The Poor Pay More. New York: Free Press.Google Scholar
DAVIS, James (1977) “Protecting Consumers from Overdisclosure and Gobbledygook: An Empirical Look at the Simplification of Consumer-Credit Contracts,” 63 Virginia Law Review 841.Google Scholar
FELDMAN, Lawrence (1976) Consumer Protection: Problems and Prospects. St. Paul: West Publishing Company.Google Scholar
GOLDMAN, Ariel (1978) “Confined Shopping Behavior Among Low Income Consumers: An Empirical Test,” 15 Journal of Marketing Research 11.Google Scholar
HIRSCHMAN, Albert O. (1970) Exit, Voice, and Loyalty: Response to Decline in Firms, Organizations, and States. Cambridge: Harvard.Google Scholar
LEVINE, Felice J. and Elizabeth, PRESTON (1970) “Community Resource Orientation Among Low Income Groups,” 1970 University of Wisconsin Law Review 80.Google Scholar
MAYER, Robert F. and Francesco M., NICOSIA (1976) “Consumer Information: Sources, Audiences, and Social Effects,” in Katz, Robert (ed.), Protecting the Consumer Interest: Public Initiative and Private Response, 41. Cambridge, Mass.: Ballinger.Google Scholar
MCNEIL, Kenneth, Jack R., NEVIN, David M., TRUBEK and R.E., MILLER (1978) “Market Discrimination Against the Poor and the Impact of Consumer Disclosure Laws: The Used Car Industry.” Madison, Wis.: Institute for Research on Poverty Discussion Paper, 486-78.Google Scholar
NEVIN, Jack R. and David M., TRUBEK (1977) An Investigation of the Retail Used Motor Vehicle Market: An Evaluation of Disclosure and Regulation. Madison, Wis.: Center for Public Representation.Google Scholar
SCHNAPPER, Eric (1967) “Consumer Legislation and the Poor,” 76 Yale Law Journal 745.Google Scholar
STEELE, Eric H. (1975) “Fraud, Dispute, and the Consumer: Responding to Consumer Complaints,” 123 University of Pennsylvania Law Review 1107.Google Scholar
STEELE, Eric H. (1977) “Two Approaches to Contemporary Dispute Behavior and Consumer Problems,” 11 Law and Society Review 667.Google Scholar
STTGLER, George (1975) The Citizen and the State. Chicago: University of Chicago Press.Google Scholar
WEXLER, Steven (1970) “Practicing Law for Poor People,” 79 Yale Law Journal 1049.Google Scholar
WHITFORD, William C. (1973) “The Functions of Disclosure Regulation in Consumer Transactions,” 1973 Wisconsin Law Review 401.Google Scholar