Publications
Publications
- 2022
- 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
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
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.