IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_12833.html

Do Microenterprises Maximize Profits? A Nonrandomized Vegetable-Market Experiment in India

Author

Listed:
  • Abhijit Banerjee
  • Greg Fischer
  • Dean S. Karlan
  • Matt Lowe
  • Benjamin Roth
  • Matthew Lowe

Abstract

We ran a nonrandomized, market-level experiment in Kolkata vegetable markets in which we subsidized vendors in some markets to sell additional produce. The vendors earned over 60% higher profits, excluding the value of the subsidy. Nevertheless, after the subsidy ended many vendors stopped selling the additional produce. Vendors knew about the profitable opportunity and demonstrated that they were capable of exploiting it without assistance. We conclude that their behavior meaningfully diverges from profit maximization when considering take-home pay, likely due to a combination of high marginal costs of effort and feared sanctions from breaking anti-competitive norms.

Suggested Citation

  • Abhijit Banerjee & Greg Fischer & Dean S. Karlan & Matt Lowe & Benjamin Roth & Matthew Lowe, 2026. "Do Microenterprises Maximize Profits? A Nonrandomized Vegetable-Market Experiment in India," CESifo Working Paper Series 12833, CESifo.
    • Handle: RePEc:ces:ceswps:_12833
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp12833.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_12833. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.