Job Market Paper
Job Market Paper
The Cost of Competition: A City-Wide Experiment on Below-Market Prices in Tanzania.
Firms in low-income countries have been shown to avoid being competitive. This project runs a field experiment to measure firms' aversion to engaging in below-market pricing. It offers guaranteed profit margins to 561 maize flour retails in Tanzania, contingent on them selling at a price 10-12.5% or 20-25% below the lowest price near the firm. Only one-third were initially willing to be treated, requiring a 380% increase in daily profits from maize flour to lower their price 10-12.5% below-market and 600% increase to sell at 20-25% below-market. However, exposure to experimentally-induced price shocks decreased firms' aversion to engaging in below-market pricing. After three weeks of treatment, 33% more firms were willing to participate in a second round of treatment, requiring 35% less profit. Reluctance to engage in competitive pricing may help explain why firms in low-income countries remain small.
Funding from Private Enterprise Development in Low-Income Countries (PEDL).
Misattribution Prevents Learning with Jessica B. Hoel, Hope Michelson, and Victor Manyong.
October 2024, American Journal of Agricultural Economics.
In many markets, consumers believe things about products that aren't true. We study how incorrect beliefs about product quality can persist even after a consumer has used a product many times. We explore the example of fertilizer in East Africa. Farmers believe much local fertilizer is counterfeit or adulterated; however, multiple studies have established that nearly all fertilizer in the area is good quality. We develop a learning model to explain how these incorrect beliefs persist. We show that when the distributions of outcomes using good- and bad-quality products overlap, agents can misattribute bad luck or bad management to bad quality. Our learning model and its simulations show that the presence of misattribution inhibits learning about quality, and that goods like fertilizer with unobservable quality that are inputs into production processes characterized by stochasticity should be thought of as credence goods, not experience goods. Our results suggest that policy makers should pursue quality assurance programs for products that are vulnerable to misattribution.
Agricultural & Applied Economics Association’s Outstanding Master’s Thesis, 2021.
Funding from PEDL, the Center for Digital Agriculture at the University of Illinois, and the Office of International Programs in the College of Agricultural, Environmental, and Consumer Sciences at the University of Illinois.
"Mark-ups and Entry in the Food Markets of a Large African City" with Brian Dillon, Ben Leyden, Todd Gerarden, and Joachim De Weerdt.
As African economies urbanize, food markets determine what people eat and how much they pay. To understand how these markets shape access and welfare, we conduct a census of the prices of four staple foods across over 2,000 retailers in Mwanza, Tanzania and run a detailed survey with 400 of these firms to understand their costs, stocking practices, pricing methods, and information used about other firms. The resulting data set fully characterizes the distribution of food prices across locations, varieties, and purchase quantities, and provides an in depth view into how these retailers make stocking and pricing decisions. The data reveal two striking patterns: Bulk discounts are smaller than previously documented and vary widely across firms, with some even charging higher unit prices for larger purchases, and food prices vary sharply across neighborhoods despite the appearance of widespread competition and low barriers to entry for retail firms. These findings highlight how the structure of local competition shapes consumer well-being in rapidly changing economies.
Funding from Structural Transformation and Economic Growth (STEG).