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
First published
April 04, 2014, 11:53 AM EDT

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

Locations

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

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
December 15, 2011, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
December 15, 2011, 12:00 +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, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials