Do Fast-Food Chains Price Discriminate on the Race and Income Characteristics of an Area?

Abstract

This article reports tests for differences in prices charged by fast-food restaurants that serve markets with customers of widely divergent incomes and ethnic backgrounds. The data contain detailed prices on items sold at over 400 Burger King, Wendy's, KFC, and Roy Rogers restaurants in New Jersey and Pennsylvania locations. I find significant differences in price based on the race and income characteristics of a zip-code region. When income and cost differences are taken into account, meal prices rise approximately 5% for a 50% rise in the black population.