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  4. Competition, Pricing, and Institutional Change in Developing Economies

Competition, Pricing, and Institutional Change in Developing Economies

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Norton_cornellgrad_0058F_15566.pdf (3.19 MB)
Permanent Link(s)
https://doi.org/10.7298/ecc8-yz31
https://hdl.handle.net/1813/126583
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Cornell Theses and Dissertations
Author
Norton, Benjamin
Abstract

This dissertation studies competition, pricing, and institutional change in developing economies. The first two chapters examine how staple-food prices are set in fragmented urban retail markets in Mwanza, Tanzania, while the third studies whether a large-scale land reform program affected civil conflict in the Philippines. The first substantive chapter studies willingness to compete on price among retail firms in an important urban food market. I run a field experiment with 561 maize flour retailers in Mwanza, Tanzania, in which firms are offered experimentally varied subsidies to publicly post prices that undercut nearby competitors. This design allows me to measure both which firms are willing to engage in visible price competition and the compensation they require to do so. I document three main patterns. First, few firms are willing to publicly undercut nearby competitors at baseline: only 33% of retailers accept the offer to participate. Second, the compensation required to do so is large and highly dispersed. Among willing retailers, the required increase in profit margins ranges from 25 to 520% relative to their current margins. Third, willingness to compete increases after firms experience or observe undercutting, while required compensation falls: 33% more firms participate in a second round, and required margins are 30-39% smaller on average. I provide suggestive evidence on mechanisms that may contribute to these patterns. Retailers who initially overestimate negative reactions from nearby firms are less likely to participate, and exposure to nearby undercutting is associated with increased subsequent participation. In addition, treated firms update toward believing that demand is more price elastic, which may help explain the decline in required compensation. Taken together, the results suggest that willingness to compete on price may be limited but responsive to experience in this setting, and that both beliefs about peer reactions and beliefs about demand may shape firms’ pricing decisions. These findings highlight a potential role for temporary price competition in generating learning about both competitors and customers in urban retail markets. The second substantive chapter studies why retailers in developing economies charge different unit prices for different purchase quantities of the same good. Using a census of 2,032 staple-food retailers in Mwanza, covering 6,263 product menus and 21,992 price-size observations, I show that price schedules are only weakly downward sloping on average but vary sharply across sellers of the same narrowly defined product. I probe the sources of this variation using a follow-up survey of 425 firms on demand and cost conditions. Price schedules are flatter where demand is more concentrated on small sizes, consistent with firms keeping frequently purchased small quantities attractive. I also find evidence of nonlinear input-cost pass-through and steeper bulk discounts for more perishable maize flour variants. By contrast, I find little support for fixed per-transaction costs or standard second-degree price discrimination as primary drivers of this heterogeneity. The final substantive chapter studies whether redistributive land reform affected civil conflict in the Philippines. I combine more than two million title-level land transfer records from the Department of Agrarian Reform with event-level conflict data, aggregating both to the province-month level for 1987 to 2004, the main years of the Comprehensive Agrarian Reform Program. Provinces with more beneficiaries of land reform relative to the number of pre-reform farms tend to experience fewer conflict events on average. In province and year fixed-effects regressions and Poisson regressions, the estimated relationship remains negative, corroborating the raw pattern, but is imprecisely estimated. In instrumental-variables specifications, the estimated relationship becomes positive, though these estimates are also highly imprecise. Taken together, the results do not support a precise conclusion about whether contemporaneous land redistribution reduced or increased conflict.

Description
231 pages
Date Issued
2026-05
Keywords
Nonlinear pricing
•
Price competition
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Retail markets
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Small firms
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Staple foods
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Tanzania
Committee Chair
Dillon, Brian
Committee Member
Dillenburg Scur, Daniela
Leyden, Benjamin
Degree Discipline
Applied Economics and Management
Degree Name
Ph. D., Applied Economics and Management
Degree Level
Doctor of Philosophy
Type
dissertation or thesis

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