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The Causal Effect of Competition on Prices and Quality: Evidence from a Field Experiment

Matias Busso, Sebastian Galiani

NBER Working Paper No. 20054
Issued in April 2014, Revised in September 2018
NBER Program(s):Development Economics

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.

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Document Object Identifier (DOI): 10.3386/w20054

Published: Matias Busso & Sebastian Galiani, 2019. "The Causal Effect of Competition on Prices and Quality: Evidence from a Field Experiment," American Economic Journal: Applied Economics, vol 11(1), pages 33-56. citation courtesy of

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