Intervention(s)
We conduct an experiment to answer the following questions: (i) Is there an economy of scale when retailers pool their purchase orders of input goods together? (ii) If such cooperation is beneficial, what has prevented them from cooperating until now?
To answer this, we hypothesize that self-organized cooperatives are hindered by coordination failure due to (H1) biased beliefs and/or (H2) high social costs of creating new links among competitors. However, when a monitor (one of our enumerators) oversaw the transactions, resolving (H3) the moral hazard induced by delegating purchases to a competitor, the cooperative managed to coordinate purchases for two weeks.
To study each of these frictions, we designed three treatment arms. For the first treatment (T1 - Information), we restore beliefs about others' willingness to participate in a cooperative by giving the number of neighbors interested in cooperating. In the second treatment (T2 - Meeting), we address the assumed high social costs of initiating cooperation by prompting meetings with retailers who have expressed interest. The meetings will be clearly labeled as a platform for those interested in consolidating their purchase orders. Finally, in the third treatment (T3 - Monitor), we appoint a monitor to oversee the transactions. In practice, an external agent will supervise the representative conducting the purchases at the wholesale market. The experiment will be run by a team of monitors trained to conduct the meetings and the cooperative in accordance with all retailers' associations.