Why Asians Pay More for Test Prep
ProPublica has an interesting new analysis:
Prices for The Princeton Review's online SAT tutoring packages vary substantially depending on where customers live. If they type some ZIP codes into the company's website, they are offered The Princeton Review’s Premier course for as little as $6,600. For other ZIP codes, the same course costs as much as $8,400.
ProPublica tested whether The Princeton Review prices were tied to different characteristics of each ZIP code, including income, race and education level. When it came to getting the highest prices, living in a ZIP code with a high median income or a large Asian population seemed to make the greatest difference.
The analysis showed that higher income areas are twice as likely to receive higher prices than the general population. ... Customers in areas with a high density of Asian residents were 1.8 times as likely to be offered higher prices, regardless of income.
Apparently Princeton Review sets its prices using a system that takes into account things like the cost of doing business and the "competitive attributes" of different places. The tutors typically live in the same place as the students, though the tutoring is done online in addition to in-person.
ProPublica ties this in with concerns about race and online transactions, quoting a White House report worrying that "algorithmic decisions raise the specter of 'redlining' in the digital economy — the potential to discriminate against the most vulnerable classes of our society under the guise of neutral algorithms."
Is Princeton Review's system — which is not an algorithm, and draws distinctions between entire cities, states, and regions rather than individual neighborhoods — a guise, or does it really just reflect supply and demand? The notion that Asians use test prep disproportionately lurks in the background of the article (there's even a reference to Tiger Moms in the title), but it never comes to the fore.
Basically, Asians, especially East Asians, use test prep much more than kids from other racial and ethnic groups — especially whites and Hispanics, who together constitute about 80 percent of the population. Therefore, all else equal, we should expect areas with high concentrations of Asians to have higher test-prep prices, based on nothing more than the law of supply and demand. (By the way, the high use of test prep among blacks is consistent with other studies.)
ProPublica also notes the concept of "disparate impact," which happens when a seemingly non-discriminatory business practice — in this case, charging higher prices in places with higher demand — affects some racial groups more than others. In some areas of the law, particularly employment law, disparate impact can make a business's policy presumptively illegal, with the company given the burden of showing that its policy is a business necessity.
The disparate-impact theory doesn't (yet) apply to online pricing, and respecting the law of supply and demand would seem to be a business necessity, but this does raise a fundamental question about the doctrine: If racial groups differ in terms of how they interact with various businesses, why would we expect business practices to affect all racial groups equally?
Robert VerBruggen is editor of RealClearPolicy. Twitter: @RAVerBruggen