Publications
Publications
- 2024
- HBS Working Paper Series
Do Collusive Norms Maximize Profits? Evidence From a Vegetable Market Experiment in India
By: Abhijit Banerjee, Greg Fischer, Dean Karlan, Matt Lowe and Benjamin N. Roth
Abstract
Social norms have been shown to facilitate anti-competitive behavior in decentralized markets.
We demonstrate that these norms can also reduce aggregate profits. First, we present
descriptive evidence of competition-suppressing norms in Kolkata vegetable markets. We
then report on a market-level experiment in which we induced a temporary relaxation of
these norms by subsidizing some vendors to sell additional produce. Our intervention raised
profits at the market level by over 60%, excluding the value of the subsidy. Nevertheless,
after the subsidy ended vendors largely stopped selling the additional produce. Our results
suggest that anti-competitive norms may partially explain the pervasiveness of small-scale
firms in developing countries.
Keywords
Citation
Banerjee, Abhijit, Greg Fischer, Dean Karlan, Matt Lowe, and Benjamin N. Roth. "Do Collusive Norms Maximize Profits? Evidence From a Vegetable Market Experiment in India." Harvard Business School Working Paper, No. 23-006, July 2022. (Revise and Resubmit, AEJ: Applied.)