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  • 2022
  • Working Paper
  • HBS Working Paper Series

Does the Invisible Hand Efficiently Guide Entry and Exit? Evidence from a Vegetable Market Experiment in India

By: Abhijit Banerjee, Greg Fischer, Dean Karlan, Matt Lowe and Benjamin N. Roth
  • Format:Print
  • | Language:English
  • | Pages:33
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Abstract

What accounts for the ubiquity of small vendors operating side-by-side in the urban centers of developing countries? Why don’t competitive forces drive some vendors out of the market? We ran an experiment in Kolkata vegetable markets in which we induced (via subsidizing) some vendors to sell additional produce. The vendors earned higher profits, even when excluding the value of the subsidy. Nevertheless, after the subsidies ended vendors largely stopped selling the additional produce. Our results are consistent with collusion and inertial business practices suppressing competition and efficient market exit.

Keywords

Collusion; Competition; Market Entry and Exit; Small Business; Microeconomics; Kolkata

Citation

Banerjee, Abhijit, Greg Fischer, Dean Karlan, Matt Lowe, and Benjamin N. Roth. "Does the Invisible Hand Efficiently Guide Entry and Exit? Evidence from a Vegetable Market Experiment in India." Harvard Business School Working Paper, No. 23-006, July 2022.
  • SSRN
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About The Author

Benjamin N. Roth

Entrepreneurial Management
→More Publications

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  • A Randomized Trial of Behavioral Nudges Delivered through Text Messages to Increase Influenza Vaccination among Patients with an Upcoming Primary Care Visit By: Mitesh S. Patel, Katherine L. Milkman, Linnea Gandhi, Heather N. Graci, Dena Gromet, Hung Ho, Joseph S. Kay, Timothy W. Lee, Jake Rothschild, Modupe Akinola, John Beshears, Jonathan E. Bogard, Alison Buttenheim, Christopher Chabris, Gretchen B. Chapman, James J. Choi, Hengchen Dai, Craig R. Fox, Amir Goren, Matthew D. Hilchey, Jillian Hmurovic, Leslie John, Dean Karlan, Melanie Kim, David Laibson, Cait Lamberton, Brigitte C. Madrian, Michelle N. Meyer, Maria Modanu, Jimin Nam, Todd Rogers, Renante Rondina, Silvia Saccardo, Maheen Shermohammed, Dilip Soman, Jehan Sparks, Caleb Warren, Megan Weber, Ron Berman, Chalanda N. Evans, Seung Hyeong Lee, Christopher K. Snider, Eli Tsukayama, Christophe Van den Bulte, Kevin G. Volpp and Angela L. Duckworth
  • What Do Impact Investors Do Differently? By: Shawn A. Cole, Leslie Jeng, Josh Lerner, Natalia Rigol and Benjamin N. Roth
  • Social Protection and Social Distancing During the Pandemic: Mobile Money Transfers in Ghana By: Dean Karlan, Matt Lowe, Robert Osei, Isaac Osei-Akoto, Benjamin N. Roth and Christopher Udry
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