Prices and competition: evidence from a social program

Abstract

ABSTRACT We use a micro price dataset for products defined at the universal product code level to analyze the impact on prices of a social program in Uruguay that allows its beneficiaries to purchase food, beverages, and cleaning items exclusively in certain small retailers. We find that an unintended negative consequence is that the beneficiaries pay significantly higher prices to other retailers. We find this result for the whole country except for areas with the highest retailer density in Montevideo’s capital city. We also do not find evidence of price discrimination of stores against program beneficiaries. The participant stores charge the same price to beneficiaries and other customers. For an overall assessment of the program, we find that an unintended consequence of it was a price increase for all customers in capital cities that increased the cost of the program.