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The Causal Effect of Competition on Prices and Quality
Last registered on April 04, 2014

Pre-Trial

Trial Information
General Information
Title
The Causal Effect of Competition on Prices and Quality
RCT ID
AEARCTR-0000343
Initial registration date
April 04, 2014
Last updated
April 04, 2014 11:53 AM EDT
Location(s)
Region
Primary Investigator
Affiliation
Inter-American Development Bank
Other Primary Investigator(s)
PI Affiliation
University of Maryland
Additional Trial Information
Status
Completed
Start date
2011-04-04
End date
2011-12-15
Secondary IDs
Abstract
This paper provides the first experimental evidence on the effect of increased competition on the prices and quality of goods. We rely on an intervention that randomized the entry of 61 retail firms (grocery stores) into 72 local markets in the context of a conditional cash transfer program that serves the poor in the Dominican Republic. Six months after the intervention, product prices in the treated districts had decreased by about 5%, while product quality and service quality had not changed. Using a theoretical model, we arrive at the conclusion that the poor segments of the population in these markets care the most about prices and much less about quality. Our results are also informative to the design of social policies. They suggest that policymakers should pay attention to supply conditions even when the policies in question will only affect the demand side of the market.
External Link(s)
Registration Citation
Citation
Busso, Matias and Sebastian Galiani. 2014. "The Causal Effect of Competition on Prices and Quality." AEA RCT Registry. April 04. https://doi.org/10.1257/rct.343-1.0.
Former Citation
Busso, Matias and Sebastian Galiani. 2014. "The Causal Effect of Competition on Prices and Quality." AEA RCT Registry. April 04. https://www.socialscienceregistry.org/trials/343/history/1484.
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Experimental Details
Interventions
Intervention(s)
The intervention involved bringing 61 new grocery stores (in 72 districts) into the a retail network of the Dominican Republic conditional cash transfer program. The experimental design allowed anywhere from zero to three new stores to start operating in each district.
Intervention Start Date
2011-05-01
Intervention End Date
2011-12-15
Primary Outcomes
Primary Outcomes (end points)
Price and quality of goods
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
The intervention consisted of an exogenous increase in the number of retailers associated with the network across districts. We use this randomized variability in market entry to evaluate the effect of an increase in competition on prices and quality. Each district was then assigned a random number in the set {0, 1, 2, 3} which defined the number of new entrant retailers that the executing agency committed to try to affiliate. Actual affiliation could, in principle, be different from the intended/randomized affiliation because of a shortage of eligible interested candidates that applied for entry into the network. Another source of non-compliance could be the failure of the executing agency to follow the intervention protocol.
Experimental Design Details
Randomization Method
Randomization done by computer
Randomization Unit
Neighborhoods/districts
Was the treatment clustered?
Yes
Experiment Characteristics
Sample size: planned number of clusters
72
Sample size: planned number of observations
440 retailers (firms) and 2160 households (consumers)
Sample size (or number of clusters) by treatment arms
For each treatment the expected sample size was 110 retailers per treatment arm and 540 households per treatment arm
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
University of Maryland Institutional Review Board
IRB Approval Date
2014-01-14
IRB Approval Number
543725-1
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
Yes
Intervention Completion Date
December 15, 2011, 12:00 AM +00:00
Is data collection complete?
Yes
Data Collection Completion Date
December 15, 2011, 12:00 AM +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
72 districts
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
400 retailers and 2118 households
Final Sample Size (or Number of Clusters) by Treatment Arms
For each treatment T={0,1,2,3}, the sample size is {111,84,101,104} retailers and {585, 534, 511, 488} households.
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports and Papers
Preliminary Reports
Relevant Papers
Abstract
Citation