Working Paper: NBER ID: w20054
Authors: Matias Busso; Sebastian Galiani
Abstract: This paper provides experimental evidence on the effect of increased competition on prices and quality in the retail sector. We randomized the entry of 61 firms into 72 markets serving the beneficiaries of a conditional cash transfer program in the Dominican Republic. Six months after the intervention entry into the market led to reductions in prices ranging from 2 to 6 percent and to a statistically significant improvement in self-reported service quality. Prices dropped more in areas where the number of entrants was larger. Competition seems to have driven part of the clientele away from incumbent retailers.
Keywords: Competition; Prices; Quality; Retail Sector; Field Experiment
JEL Codes: D4; I31; I38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Entry of new retailers (L81) | Reductions in prices (P22) |
| Increased competition (L13) | Improvement in self-reported service quality (L15) |
| Increased competition (L13) | Changes in consumer behavior (D19) |
| Increased competition (L13) | Retailer performance (L81) |