Cooperation and undercutting

Last registered on May 29, 2024
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Pre-Trial

Trial Information

General Information

Title
Cooperation and undercutting
RCT ID
AEARCTR-0013673
Initial registration date
May 23, 2024

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
May 29, 2024, 1:46 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
India
Region
Bihar

Primary Investigator

Name
Varun K
Affiliation
Harvard University
Contact Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Status
In development
Start date
2024-01-01
End date
2025-12-31
Keywords
Labor
Additional Keywords
negotiations, wage floors, undercutting
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
In this trial, we plan to understand the nature of negotiations on wages between firms and workers in low and middle income countries.
External Link(s)

Registration Citation

Citation
K, Varun. 2024. "Cooperation and undercutting." AEA RCT Registry. May 29. https://doi.org/10.1257/rct.13673-1.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
Intervention (Hidden)
In this study, we plan to understand how negotiations between firms and workers vary with the type of job for which the worker is being hired.

Our setting is an urban labour stand in India, where workers from different parts of the city and nearby rural areas come to seek work (mostly in construction). Firms which are looking for workers come to the stand to hire workers. Firms offer two kinds of jobs, i) a job in which workers have to work for a fixed number of hours, usually for 8 hours in a day (including lunch), wherein the number and types of tasks to be performed can vary. We call these daily wage jobs; ii) a fixed work job in which the task is well-defined but the number of hours can vary.
First, we will collect data on the going wage for these two types of jobs at multiple labor stands. Our priors suggest that the (reservation) wage distribution for the same fixed work jobs is more likely to be spread out than for a daily wage job.

Secondly, we plan to collect data on negotiations between firms and workers in real-time in these labor stands for these two types of jobs. These stands have a much higher supply of labor than demand. Hence, one would expect that undercutting is common. We will observe negotiations on wage between firms and workers, and hence also observe whether workers try to undercut each other during these negotiations. Undercutting is considered to have taken place, when a worker comes to an ongoing negotiation between a firm and worker, and quotes a price below the price which the first worker had quoted. Our hypothesis is that undercutting is much more likely in fixed work jobs compared to daily wage jobs and this is because the priors over the reservation wage of the former are more varied than the latter.

In the third step, we will inform workers at a random subset of stands about the reservation wage of different workers over fixed wage jobs. This information would be put up as a poster at the stand. We will then measure the effect of this common knowledge on undercutting behavior of workers for fixed work jobs.
Intervention Start Date
2024-01-01
Intervention End Date
2025-12-31

Primary Outcomes

Primary Outcomes (end points)
Undercutting
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
.
Experimental Design Details
The first two parts of our study (described above) are not experimental in nature.

We will describe the experiment that we plan to run in the third part below:
We will choose 30 labor stands for our experiment. 15 of these would be treatment stands, and 15 would be control (both chosen randomly).
We will collect pre treatment data on undercutting rates of workers for different fixed wage jobs. This data will be collected for 30 days.
In the treatment labor stands, we will put up banners/posters about the beliefs of workers about the reservation wage for fixed work jobs after 30 days. This would be a single number for each fixed work job. We will then collect post-treatment data on negotiations and undercutting at each stand (both treatment and control).
Our experiment will test whether undercutting reduces after the workers are informed of the most common reservation wage of workers at the stand for each job.
Randomization Method
Done in office by the computer.
Randomization Unit
Market level
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
.
Sample size: planned number of observations
5000 individual level observations
Sample size (or number of clusters) by treatment arms
15 markets control, 15 markets treatment
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
University of Chicago
IRB Approval Date
2024-04-23
IRB Approval Number
IRB24-0376
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials