Firms' willingness to compete and consumers' willingness to search in urban areas in low-income countries

Firms and labor market participants have been shown to avoid public competition in low-income countries, affecting privately profit-increasing behaviour. In this project the research team measures firm-specific aversion to public competition in Mwanza, Tanzania by subsidizing urban firms to publicly undercut each other. They subsidize one-fifth of the firms selling whole-wheat maize flour to sell it at prices 10-25% below the minimum price in the study area. They use the subsidy allocation to study the impact of below-equilibrium prices at subsidized firms on themselves, unsubsidized firms, and consumers.