Wholesale Price Discrimination in Global Sourcing:Field Experiment on Alibaba

Past research has found price discrimination in B2C markets, where buyers are end customers. There is limited study on suppliers’ price quoting behavior and price discrimination on B2B markets. It is unclear whether characteristics of B2B buyers, who are often representatives of firms and not the end customers,would influence suppliers’ pricing decisions. In this research, we investigate whether there exists wholesale price discrimination, by conducting randomized field experiments on Alibaba.com, the world largest online global trade platform. We find that there is no significant difference in the wholesale prices quoted by suppliers to U.S. and South Africa buyers. We also find that suppliers quote a significantly higher wholesale price to White buyers than Asian or Black buyers across countries. However, price discrimination disappears when buyers present market information to sellers—providing the lowest wholesale price offered by other suppliers in the market, whereas price discrimination remains when buyers present social information to sellers—indicating the buyer is recommended by a previous customer. In addition, we find that market information can help buyers obtain a lower wholesale price because it signals a lower willingness to pay.Social information, however, can reduce price quotes for only Black and White buyers as it fosters trust, but not for Asian (particularly Chinese) buyers possibly due to the distrust between Chinese sellers and buyers.