Microenterprise Competition, Social Pressures, and Innovation

Working Paper
Published on 1 December 2014

Abstract

What is the nature of competition amongst densely-located, largely similar microenterprises in the developing world? While standard theories of imperfect competition seem to rationalize a number of features of such markets, there is reason to believe that there may be additional social tensions at play. To make initial progress on these issues we conduct a framed lab-in-field experiment in Indonesia, recruiting peri-urban market participants to participate in a series of market games framed to match the real-world setting. We study both the "intensive margin" (play within a market with a fixed set of two participants) and the "extensive margin" (markets where individuals can choose to enter and exit). What we find is mixed: while a number of features of the results are consistent with purely self-regarding play, other features suggest additional social and strategic tensions. Subsequent analysis further suggests important heterogeneity in behaviour within the population.

Authors

Alex A. Oo

University of Sydney

Russell Toth

University of Sydney