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Trial Title
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Before
Learning and Using Competitor Information in Mwanza, Tanzania
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After
The Cost of Competition in Mwanza, Tanzania
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Abstract
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Before
Firms are typically modeled as profit-maximizing agents who know and use information. In low-income countries, information frictions are more salient than typically assumed and many firms are run by a single person. In this project I study whether small urban firms value, learn, and use information about their competitors. First, I measure how well these firms know the prices at other firms. Next, I elicit their willingness to pay for this price information. Contingent on this valuation, I randomly share price information with some firms. I measure whether and how firms change their prices upon learning the prices at their competition.
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After
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.
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Last Published
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May 30, 2024 03:56 AM
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After
August 27, 2024 03:39 PM
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Intervention (Public)
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Before
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After
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.
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Intervention Start Date
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July 10, 2024
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After
August 28, 2024
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Intervention End Date
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Before
August 14, 2024
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After
September 27, 2024
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Primary Outcomes (End Points)
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Before
Prices of common staple foods at small urban firms in Mwanza, Tanzania.
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After
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.
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Did you obtain IRB approval for this study?
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Before
No
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After
Yes
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Secondary Outcomes (End Points)
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Before
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After
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.
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Building on Existing Work
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Before
Yes
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After
No
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