NFT Marketplace Bias: Study Reveals Female and Black Avatars Sell for Less

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. 

They found that, contrary to expectations, there were pronounced gender and racial disparities in NFT prices. They also found that avatars with features associated with high-tech or higher education countered these disparities. The authors offer insights into policy strategies to promote racial and gender equity in the NFT marketplace.

The study, by researchers from the Tepper School of Business(opens in new window) at Carnegie Mellon University, New York University, and Harvard University, appears in the International Journal of Research in Marketing(opens in new window).

“Based on the observation that NFT investors often represent a younger, wealthier, and more politically progressive demographic, we sought to determine whether this marketplace might be less susceptible to prejudice and social bias,” said Yuan Yuan, a Ph.D. student in marketing at CMU, who led the study. “As the NFT market continues to grow and increasingly leverages digital communities as brand assets, such questions will become increasingly important.”

In the NFT marketplace, avatar headshots serve as representations of individuals’ digital identities. In this study, researchers sought to identify the effects of avatars’ gender and race on NFT prices, how these effects varied over time, and what providers can do to mitigate disparities.

The study found that female CryptoPunks(opens in new window) avatars were sold at a 37% lower price than their male counterparts (i.e., avatars with similar image attributes), while Black CryptoPunks avatars were sold at a 31% lower price than their white counterparts. In a controlled lab experiment, the study causally confirmed both gender and race price premiums, as well as the presence of racial bias in these purchasing behaviors.

Researchers also identified features of the avatars linked to high-tech or higher education (e.g., 3D virtual reality headsets or nerd glasses), finding that avatars with these features countered the disparities. This suggests incorporating such attributes into avatars could counteract bias in the NFT marketplace.

This study challenges the notion that gender and racial biases are diminished in the emerging, technologically advanced marketplace. The findings reveal deep-seated and persistent societal stereotypes and prejudices in the digital marketplace, particularly in the devaluation of Black avatars across demographics, highlighting the complexity of biases in digital marketplaces.

“By considering our findings, NFT creators and platforms can promote a more balanced marketplace by introducing attributes that counteract bias,” explained Kannan Srinivasan(opens in new window), 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 note some limitations of their study, including the challenge of distinguishing between factors perceived as more valuable and those that are personally preferred, and the exclusivity of their focus on human avatars. In addition, they note that their database's diversity might not fully represent the general population.