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The Cost of Competition in Mwanza, Tanzania

Last registered on August 27, 2024
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Pre-Trial

Trial Information

General Information

Title
The Cost of Competition in Mwanza, Tanzania
RCT ID
AEARCTR-0013703
Initial registration date
May 28, 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 30, 2024, 3:56 AM EDT

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

Last updated
August 27, 2024, 3:39 PM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country
Tanzania, United Republic of
Region
Mwanza

Primary Investigator

Name
Ben Norton
Affiliation
Cornell University
Contact Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Status
In development
Start date
2024-06-10
End date
2025-01-31
Keywords
Firms & Productivity
Additional Keywords
JEL code(s)
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
Firms are typically modeled as profit-maximizing agents. In low-income countries, many firms are subject to social relationships that affect profit-maximizing behavior. In this project I study the cost of competition between small, urban firms by measuring their minimum profit needed to publicly undercut competitors. By subsidizing firms to post below-equilibrium prices, I additionally study how firms respond when competitors sell at below equilibrium prices.
External Link(s)

Registration Citation

Citation
Norton, Ben. 2024. "The Cost of Competition in Mwanza, Tanzania." AEA RCT Registry. August 27. https://doi.org/10.1257/rct.13703-1.1
Sponsors & Partners

Partner

Name
Institute of Rural Development Planning
Type
government
URL
https://www.irdp.ac.tz/
Experimental Details

Interventions

Intervention(s)
I subsidize the restocking cost of dona maize flour, a staple food, at retail firms that sell dona maize flour contingent on them selling it at a given, low price and making the price publicly known.

This experiment allows me to measure the firm-specific cost of competition and study how firms react to selling at below-equilibrium prices. I use this experiment in the first stage in a secondary study of how firms react when their competitors post below-equilibrium prices.
Intervention (Hidden)
Intervention Start Date
2024-08-28
Intervention End Date
2024-09-27

Primary Outcomes

Primary Outcomes (end points)
a. Firm-level profit margin needed to publicly post and sell at a low price relative to prices around them.
b. Price of dona maize flour, the subsidized food.
c. Number of customers per day who buy dona maize flour.
d. Profit margin of dona maize flour.

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
a. Total revenue per day.
b. Total number of customers per day.
c. Whether prices of dona maize flour are publicly posted.
d. Change in beliefs about customer demand elasticity for dona maize flour.
e. Change in beliefs about prices of dona maize flour at nearby firms.
f. Price of sembe maize flour, a more-expensive substitute that is unsubsidized.
g. Number of customers per day who buy sembe maize flour.
h. Input cost of sembe maize flour.
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
I collect prices of staple foods at small firms in Mwanza, Tanzania. At treatment firms I elicit their beliefs about these prices at nearby firms and their willingness to pay for this price information. Contingent on their willingness to pay, some treatment firms are randomly given the price information. I again collect prices and construct the within-firm change in prices to use as my main outcome. I see whether receiving information causes firms to change prices and how this varies by their relative place in their local price distribution.
Experimental Design Details
Randomization Method
Randomization done in office by a computer
Randomization Unit
Firm
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
700 firms
Sample size: planned number of observations
700 firms
Sample size (or number of clusters) by treatment arms
200 firms control
200 firms treatment and do not receive information
300 firms treatment and receive information
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Cornell University Institutional Review Board for Human Participants
IRB Approval Date
2024-06-18
IRB Approval Number
IRB0147510
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