Social interaction gets you a better deal

We all know that people are susceptible to soft forms of influence. Why do you think companies spend tons of money on wining and dining their clients and why more and more companies introduce rules that their employees cannot accept gifts worth more than a certain amount?

But in the world of internet purchases this social component is increasingly reduced to a couple of emails and phone calls. In many instances, particularly since the onset of the pandemic, buyers often don’t even know how the person they order from looks like. And this leads to worse outcomes for both the buyer and the seller.

A new study tried to assess the impact facial attractiveness has on the decisions of both buyers and sellers. When I read about that study, I first thought: “Here we go again. Another study that shows that attractive people are treated better than unattractive people.” But the results are more interesting than that.

The study asked participants in a lab experiment to take the role of a wholeseller, or a retail customer of the wholeseller. First, the wholeseller was asked to quote a price for the goods to sell. The retailer, once he has been quoted a price is then asked to place an order choosing how many items to order. Depending on the experimental setup, either the retailer or the wholeseller or both would see the face of their counterpart in the transaction or they would not see a face at all. Furthermore, the faces shown to them were standardised and could be either attractive or unattractive, male or female.

Faces shown to the participants in the experiment

Source: Starostyuk et al. (2021)

The first  result, and probably the least surprising, is that if people were shown faces of their counterparts in the negotiation gave significantly better conditions, that is the wholesellers were offering lower prices and the retailers ordered more items. We humans are social animals and dealing with a human (even if it is just a face on an email as in the experiment) makes us more socially minded and both sides in a trade get a better deal.

The experiment didn’t test for a difference between faces shown in an email or on a screen and personal interaction, but I am pretty sure that the work-from-home crowd does get a worse deal than the people who personally meet with their clients. Similarly, I am pretty sure that when it comes to promotions and other career benefits, the work-from-home crowd that are more remote and have fewer in person interactions with their colleagues and bosses will get fewer promotions and lower bonuses.

In any case, besides the obvious benefits of seeing someone’s face, there are also gender and attractiveness effects. First, women get a better deal, but that is not dependent on the attractiveness of a woman. Wholesellers offer a lower price to unattractive and attractive women alike and retailers order a larger quantity from women than they do from men.

But aside from this gender effect there is also an attractiveness effect, though that effect is less pronounced  than the pure gender effect and – at least in the experiment – it seems to work better for attractive men than for attractive women. Essentially, attractive women are quoted pretty much the same price by the wholeseller than unattractive women, but attractive men are quoted a lower price than unattractive men. And when it comes to the retailer’s orders it is again the attractive men that receive the bigger orders, not the attractive women. The beauty premium seems real, but it is ironically mostly a male beauty premium, not a female beauty premium.