Gender and Racial Disparities Found in the Non-Fungible Token (NFT) Marketplace

In a new study, researchers from Carnegie Mellon University examined the impact of avatars' gender and race on transaction prices in the non-fungible token (NFT) marketplace.

Researchers from Carnegie Mellon University, New York University, and Harvard University have conducted a new study examining the impact of avatars' gender and race on transaction prices in the non-fungible token (NFT) marketplace. Their findings, published in the International Journal of Research in Marketing, reveal pronounced gender and racial disparities in NFT prices, challenging the expectation that these disparities would be diminished in the emerging digital marketplace.

The study, led by Yuan Yuan, a Ph.D. student in marketing at CMU, sought to investigate the presence of gender and racial biases in the NFT marketplace, given the younger, wealthier, and more politically progressive demographic of NFT investors. As the NFT market continues to grow and digital communities are increasingly leveraged as brand assets, understanding such biases becomes crucial.

In the NFT marketplace, avatar headshots represent individuals' digital identities. The researchers aimed to identify the effects of avatars' gender and race on NFT prices, how these effects varied over time, and what NFT providers could do to mitigate disparities.

Their analysis of CryptoPunks avatars, a popular NFT collection, revealed that female CryptoPunks were sold at a 37% lower price than their male counterparts (i.e., avatars with similar image attributes), while Black CryptoPunks were sold at a 31% lower price than their white counterparts. Furthermore, a controlled lab experiment causally confirmed both gender and race price premiums, as well as the presence of racial bias in these purchasing behaviors.

Interestingly, the study also found that certain attributes of the avatars, such as those linked to high-tech or higher education (e.g., 3D virtual reality headsets or nerd glasses), were associated with countering the disparities. Incorporating these attributes into avatars could potentially counteract bias in the NFT marketplace.

These findings challenge the notion that gender and racial biases are diminished in the emerging, technologically advanced marketplace. Instead, the study highlights deep-seated and persistent societal stereotypes and prejudices in the digital marketplace, particularly in the devaluation of Black avatars across demographics, showcasing the complexity of biases in digital marketplaces.

"NFT creators and platforms can promote a more balanced marketplace by introducing attributes that counteract bias," said Kannan Srinivasan, professor of management, marketing, and business technology at CMU, who co-authored the study. "NFT platforms that want to harmonize efficiency with fairness can also adopt policies that discourage bias, providing more equitable guidelines for the creation and transaction of NFTs."

The authors also acknowledged some limitations of their study, such as the difficulty in distinguishing between factors perceived as more valuable and those that are personally preferred, and the exclusive focus on human avatars. Additionally, they noted that the diversity of their database might not fully represent the general population.