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Propublica released findings today suggesting that the Princeton Review — one of the nation’s top standardized test prep services, which offers in-class and one-on-one tutoring options for prospective students — is significantly more likely to charge Asian American students higher prices for the same test prep services.
The disparity comes from a practice employed by many online and offline retailers wherein the price of a good or service is influenced by various factors. Online retailers, in particular, frequently employ an algorithm that factors in buyer geography and other characteristics before generating a quote for a particular item. Although offline markets are required to demonstrate that local differences in prices do not disproportionately impact any particular class of buyer over others, online retailers are not held to the same standard: online retailers are able to collect an unprecedented amount of buyer information before offering a price, and algorithm-based pricing can draw upon a series of seemingly innocuous details about a buyer to create the net effect of setting predatory pricing for some classes of buyers over others.
In a recent White House memo on the effects of “Big Data” and economic activity, advisors warned that algorithm-based pricing could create a novel problem of “digital redlining”, where companies employ unfair economic practices that specifically target certain groups of consumers. That memo urged new regulations to prevent such predatory economic practices, and that would also emphasize online consumer privacy.
The Princeton Review offers in-class and one-on-one college prep and tutoring services (termed its “Premier” package of services) for between $6600 and $8400, depending on the student’s zip code which is input before a quote is generated by the company’s website. Propublica reports that it tested nearly 35,000 US zip codes, and found that the vast majority retrieved a $6600 quote; however, for students living in California, the East Coast, and Texas, among other states, quotes skyrocketed to as much as $8600. The study was inspired by an earlier study conducted by Harvard undergraduate students Keyon Vafa, Christian Haigh, Alvin Leung and Noah Yonack and published in Tech Science, which found price discrimination by Princeton Review for its online tutoring packages, which the authors reasoned should be immune to local fluctuations in tutoring costs.
The Asian American population is highly concentrated in these areas. The top five states of residence for Asian Americans are California, New York, New Jersey, Texas, and Hawaii. Propublica found that an Asian American student seeking Princeton Review services are — by virtue of the company’s algorithm-based pricing — twice as likely to be quoted a higher price.
The news comes in the context of stories published last year revealing the Princeton Review’s insensitive and race-baiting advice for prospective college students. In a publication authored by the company, the Review advises Asian American college applicants to take steps to appear less Asian in their applications, while it suggests Black and Hispanic students attach photographs of themselves to ensure that admissions officers are aware of their race.
It is unclear whether in addition to disparaging Asian American applicants, Princeton Review has also developed an algorithm to set its prices in a manner that deliberately preys upon Asian American students, or whether Propublica is merely reporting on a correlative relationship between Princeton Review prices and race. Indeed, Asian Americans are more likely to have a higher median family income and to live in more urban areas: it may be that Princeton Review is setting higher prices for students hailing from wealthier areas. This is the basic defense invoked by the Princeton Review, itself. Princeton Review argued in a statement that the differences in prices found by Propublica were based on local differences in the costs of hiring a tutor, and sai:
To equate the incidental differences in impact that occur from this type of geographic based pricing that pervades all American commerce with discrimination misconstrues both the literal, legal and moral meaning of the word,” the company said in its statement.
Yet, Propublica found that zip codes with high concentrations of Asian American residents but that had lower median incomes still returned the more expensive prices for test prep classes.
It seems plausible, then, that Princeton Review is actually employing an algorithm that factors in the possibility that a student is Asian American in setting quoted prices, perhaps on the assumption that standardized test prep classes are in higher demand among Asian American families, and therefore those families might be willing to pay more for the same service. Indeed, a study published several years ago showed that as many as one-third of Chinese American high school students use some form of extracurricular SAT test prep course — twice the usage rate as non-Chinese students — in 2002.
Nevertheless, whether we are talking about unequal lending practices in the Black community, or lower income buyers paying more for office supplies at Staples, or the Princeton Review charging its Asian students more for college prep courses, predatory economic practices that disproportionately charge some consumers higher prices over others are unfair and discriminatory.
No one should have to pay an economic penalty for their racial background.
Note: And, that is how you write an article about predatory economic practices targeting Asian American consumers without using the cliched phrase “Tiger Mom” in the headline.
