Chapter B.6, Problem 19AYU

Car-Buying Discrimination To determine if there is gender and/or race discrimination in car buying, Ian Ayres put together a team of fifteen white males, five white females, four black males, and seven black females who were each asked to obtain an initial offer price from the dealer on a certain model car. The 31 individuals were made to appear as similar as possible to account for other variables that may play a role in the offer price of a car. The following data are based on the results in the article and represent the profit on the initial price offered by the dealer. Ayres wanted to determine if the profit based on the initial offer differed among the four groups.

Source: Ian Ayres. “Fair Driving: Gender and Race Discrimination in Retail Car Negotiations.” Harvard Law Review. Vol. 104, No. 4, Feb. 1991.

1. (a) What is the response variable in this study? Is it qualitative or quantitative?
2. (b) State the null and alternative hypotheses.
3. (c) A normal probability plot of each group suggests the data come from a population that is normally distributed. Verify the requirement of equal variances is satisfied.
4. (d) Test the hypothesis stated in part (b).
5. (e) Draw side-by-side boxplots of the four groups to support the analytic results of part (d).
6. (f) What do the results of the analysis suggest?
7. (g) Because the group of black males has a small sample size, the normality requirement is best verified by assessing the normality of the residuals. Verify the normality requirement by drawing a normal probability plot of the residuals.