Gotta' Have Money to Make Money? Bargaining Behavior and Financial Need of Microentrepreneurs

Morgan Hardy (New York University Abu Dhabi)
Gisella Kagy (Vassar College)
Lena Song (New York University)

Abstract : Bargaining over purchase prices with microenterprise owners in Ghana, we show that poorer microentrepreneurs agree to significantly lower prices than wealthier firm owners. This relationship is robust to controlling for a plethora of observables, including owner fixed effects across two rounds of panel data. A computerized bargaining experiment on the same sample, with randomized initial endowment, corroborates our real-bargaining panel findings. A simple extension of classic bargaining theory to include endowments with Constant Relative Risk Aversion (CRRA) preferences yields a similar prediction. Further exploration of this "need-bargaining'' relationship is a key frontier in understanding barriers to the profitability of microenterprises.

Informational Barriers to Accessing Demand: Experimental Evidence from Liberian Firms

Vinayak Iyer (Columbia University)
Jonas Hjort (Columbia University )
Golvine de Rochambeau (Sciences Po)

Abstract : A widely held view is that productive firms in poor countries stagnate due to limited access to demand. We hypothesize that overlooked informational barriers to selling goods and services reduce access to demand. To investigate, we gave a randomly chosen subset of Liberian firms vouchers for a seven day-long training program. The program teaches how to compete for input procurement contracts from corporations, governments, and other large buyers that are awarded through a formal tender process. Firms that participate bid on more tenders; win about three times as many tender and non-tender contracts; and win contracts of higher quality. These benefits are concentrated among firms with access to the Internet. We use a simple model to illustrate two potential explanations: additional contracts being publicized online, and Internet access facilitating search and communication with buyers. Both mechanisms appear to be important in Liberia. We show this by exploiting variation in the composition of demand. When online demand—the share of tenders publicized online—is low, trained firms with Internet access win more non-tender contracts, pointing towards the search and communication mechanism. When online demand is high, trained firms with Internet access win both more non-tender contracts and more tenders, suggesting that online market access also matters. The Internet thus appears to dampen traditional information frictions, but—perhaps surprisingly—not informational barriers to firms in poor countries selling goods and services to large buyers. This may make such barriers the limit to many firms’ market in an online world.

Product Conflation and Marketplace Design: Evidence from Ethiopia’s Commodity Exchange

Ameet Morjaria (Kellogg School of Management, Northwestern Univers)

Abstract : In this ongoing project I explore the impact on market participants on changing “product” definition rules on a financial platform in a developing. Specifically, I examine the equilibrium effects on sellers and buyers when a “products” definition is de-conflated. In my context, a trading platform changed interactions between agricultural producers and buyers in the trading of coffee. The arrival of the trading platform by design made buyer-seller transactions anonymous. While an exchange solves the search and contracting frictions, at the same time it gives rise to a new set of issues for commodities whose precise quality and supplier origin matters to buyers. The commoditization (conflation) meant traceability in the supply chain evaporated. These rules of trading lasted for a decade and recently have been changed, I am interested in understanding this reform.