Racial and LGBT bias persists in ridesharing drivers despite mitigation efforts

Jul 22, 2020

3 min

Despite efforts by ridesharing companies to eliminate or reduce discrimination, research from the Indiana University Kelley School of Business finds that racial and LGBT bias persists among drivers.


Platforms such as Uber, Lyft and Via responded to drivers' biased behavior by removing information that could indicate a rider's gender and race from initial ride requests. However, researchers still found that biases against underrepresented groups and those who indicate support for the LGBT community continued to exist after drivers accepted a ride request -- when the rider's picture would then be displayed.


In other words, their efforts shifted some of the biased behavior until after the ride was confirmed, resulting in higher cancellation rates. Understanding whether bias has been removed also is important for ridesharing companies as they not only compete against each other but also with traditional transportation options.


"Our results confirm that bias at the ride request stage has been removed. However, after ride acceptance, racial and LGBT biases are persistent, while we found no evidence of gender biases," said Jorge Mejia, assistant professor of operations and decision technologies. "We show that signaling support for a social cause -- in our case, the lesbian, gay, bisexual and transgender community -- can also impact service provision. Riders who show support for the LGBT community, regardless of race or gender, also experience significantly higher cancelation rates."


Mejia and co-author Chris Parker, assistant professor in the information technology and analytics department at American University in Washington, believe they are the first to use support for social causes as a bias-enabling characteristic. Their article, "When Transparency Fails: Bias and Financial Incentives in Ridesharing Platforms," is published in Management Science.


They performed a field experiment on a ridesharing platform in fall 2018 in Washington, D.C. They randomly manipulated rider names, using those traditionally perceived to be white or Black, as well as profile pictures to observe drivers' behavior patterns in accepting and canceling rides. To illustrate support for LGBT rights, the authors overlaid a rainbow filter on the rider's picture profile.


"We found that underrepresented minorities are more than twice as likely to have a ride canceled than Caucasians; that's about 3 percent versus 8 percent," Mejia said. "There was no evidence of gender bias."


Mejia and Parker also varied times of ride requests to study whether peak price periods affected bias. They found that higher prices associated with peak times alleviated some of the bias against riders from the underrepresented group, but not against those who signal support for the LGBT community.


They believe that ridesharing companies should use other data-driven solutions to take note of rider characteristics when a driver cancels and penalize the driver for biased behavior. One possible way to punish drivers is to move them down the priority list when they exhibit biased cancellation behavior, so they have fewer ride requests. Alternatively, less-punitive measures may provide "badges" for drivers who exhibit especially low cancellation rates for minority riders.


But, ultimately, policymakers may need to intervene, Mejia said.


"Investments in reducing bias may not occur organically, as ridesharing platforms are trying to maximize the number of participants in the platform -- they want to attract both riders and drivers," he said. "As a result, it may be necessary for policymakers to mandate what information can be provided to a driver to ensure an unbiased experience, while maintaining the safety of everyone involved, or to create policies that require ridesharing platforms to monitor and remove drivers based on biased behavior.


"Careful attention should be paid to these policies both before and after implementation, as unintended consequences are almost sure to follow any simple fix."

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Kelley professor’s M-Score model remains most viable means of predicting corporate fraud

BLOOMINGTON, Ind. — Enhanced oversight over the auditing profession and firms’ financial reporting has led to a proliferation of models to predict financial statement fraud. But one of the first forensic models, the M-Score, devised by an Indiana University Kelley School of Business professor in the late 90s, remains accurate and is the most economically viable for investors to use, according to a forthcoming paper in The Accounting Review — the official journal of the American Accounting Association. The article, “The Costs of Fraud Prediction Errors,” co-authored by M. Daniel Beneish, professor of accounting and the Alva L. Prickett Chair at Kelley, compares seven fraud prediction models with a cost-based measure that nets the benefits of correctly anticipating instances of fraud against the costs borne by incorrectly identifying non-fraud firms as fraudulent. Even though newer fraud models early doubled the success rate of M-Score, which Beneish developed, they did so at the cost of a much larger number of false positives. As a result, the other models are not used in practice by auditors because they are too costly to implement as all flagged firms must be carefully investigated. “I have long known from my experience consulting with Arthur Andersen — for whom my model detected Enron before the debacle — and other public accounting firms, that litigation concerns relating to false positives — firms incorrectly flagged as having fraudulent financial statements — created an unwillingness by auditors’ general counsel to use fraud prediction models in practice,” Beneish said. “My efforts back then to improve the M-Score in the context of auditing failed because I could not increase the model’s success rate without increasing the number of false positives. It seems that the new models cannot either,” he added. Interestingly, as early as 2017 the M-Score flagged Kangmei Pharmaceutical, a Chinese publicly traded company that was involved in financial reporting fraud between 2016 and 2018. Like the Enron scandal in the U.S., the Kangmei Pharmaceutical scandal helped trigger new regulation in China that increased regulatory penalties for financial fraud (effective March 2020) and last November became China’s first successful class-action lawsuit involving corporate fraud. Its chairman was sentenced to 12 years in prison. “The main purpose of our paper is to provide evidence on the costs and benefits of using fraud prediction models, and to show whether using these models is economically viable for auditors, investors and regulators,” Beneish said. “This is important because the traditional measures commonly used in recent research to justify new models are misleading about model performance in fraud samples as the proportion of fraud firms in the population is very small, and as they typically assume that the cost of a false positive and false negatives (missed detections) are equal.” For example, assume that among 10,000 publicly traded firms, there are about 60 fraud firms and 9,940 firms without misreporting. The newer models detected 42 frauds (70% of the total frauds), and incorrectly flagged 3,976 firms (40% of the non-frauds). The latter is too large a number for most decision makers to investigate. “Our evidence that a cost-based assessment of models is preferable to traditional model comparison measures (e.g., area under the curve), should become even more important as efforts by future researchers in the areas of data mining and machine learning intensify,” Beneish said. Patrick Vorst of Maastricht University, assistant professor in financial accounting and accounting & information management, co-authored the paper with Beneish.

3 min

Declining viewership for live events, including the Super Bowl, presents concerns for advertisers

This year’s NFL Championship, best known as the Super Bowl, will again be one of the most watched events. But public interest in live events appears to be declining, even for the “Big Game,” say two marketing professors at the Indiana University Kelley School of Business. “Live sports events are the last stand for live TV, with the Super Bowl being the biggest spectacle to unite the American audience. Live events like this are languishing. Need proof? Look at record low ratings for award shows,” said Ann Bastianelli, teaching professor of marketing at Kelley, who added that the Super Bowl remains “a rare opportunity to gauge the U.S. cultural consciousness.” “The early reports and teasers suggest that Super Bowl viewers are in for a smorgasbord of memorable and even humorous commercials, providing some much-needed laughs during the ongoing pandemic. Even so, the Super Bowl isn’t enjoying the same viewership it once had which should prompt changes in marketing decisions,” added Demetra Andrews, clinical associate professor of marketing. With a television audience of more than 90 million last year, the Super Bowl continues to provide the biggest platform for advertisers. But, according to Andrews, television viewership of the Super Bowl has declined fairly steadily for years and the increase in livestreaming of the game does not account for the decline. Of note, she said, is a persistent decline in watchers aged 18-49 since 2008, a key component of the Super Bowl audience. According to Morning Consult, 40% of Generation Z-aged American aren’t sports fans, compared to only 24% of Millennials opting out of sports. Gen Z may be more likely to watch and share ads online than during the sporting event. “Despite this, the price for advertising during the Super Bowl has remained high for a 30-second ad. This is likely to prompt marketing organizations to reexamine the value of the Super Bowl as a promotional platform,” Andrews said. The cost of a 30-second commercial in the 2022 game is $6.5 million, up significantly from the $5.5 million price tag of just a year ago. “Clearly, the network is not bashful about asking that, even with the misgivings that advertisers have had in the past few years,” Bastianelli said. Super Bowl parties traditionally have been a big part of the game day experience and something most attractive to advertisers. But with larger gatherings discouraged and even restricted last year, this aspect was greatly diminished for the 55th Super Bowl. More people may gather to watch the game, while others will be hesitant to do so. “Without Super Bowl parties, brands might not get the same return on investment, because people couldn’t discuss ads in real-time with others, so brands shifted to digital/online advertising to avoid the $5.5 million price tag,” Bastianelli said. They also do this “because spending money online builds reach and frequency and gives brands valuable data to maximize customer engagement much more cost-efficiently. “The downside is that, while culture spreads at the speed of social, it’s much harder to stand out with sustained hype,” she added. Reevaluation of the Super Bowl as a promotional platform should include a determination of whether an organizations’ target customer groups are likely to watch or attend a Super Bowl event, Andrews said. Both professors are available for interviews. Contact George Vlahakis at vlahakis@iu.edu for assistance.

2 min

Companies face unique marketing challenges during Olympics due to human rights concerns

Many companies have used the Olympics as an ideal platform for positioning their brand to worldwide audience. However, with the games being held in a nation facing international criticism over human rights and privacy issues, the 2022 Olympics in Beijing Feb. 4-20 will present challenges in marketing. Kim Saxton, clinical professor of marketing, said China’s human rights policies present a predicament for Olympic sponsors. While some companies – such as the Coca Cola Co. – have said they won’t advertise at the games, others that do may take a different approach than they have in the past. “It creates an interesting challenge. There is more airtime available and the controversy is stoked. The athletes deserve the support. In fact, they depend on it. But with the U.S. government not sending a delegate, it creates an air of caution,” Saxton said, adding “the U.S. government has not expressly said that companies cannot advertise. “There are other issues to consider as well. First, the winter Olympics have been very quiet. It’s quite unusual to have summer and winter Olympics within one year. Many consumers need that bi-annual cadence in order to process information about the Olympics and get excitement up,” she added. “Many Americans right now probably cannot name an athlete in more than one sport. And the games start in about two weeks. “Traditionally, the Olympics is one of the few places that advertisers can find a critical mass of viewers on TV today. The Super Bowl, the Olympics and the FIFA World Cup are the largest TV audiences. So, advertisers have to be creative this year. Some will not mention the host city. Some will run ads that don’t mention the Olympics. Some will stay away. Finally, some will move their efforts to PR. They will balance a fine line of promoting their brands and athletes, while not promoting China.” Saxton can be reached at mksaxton@iupui.edu.

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