School of Economics

Invites you to a

School seminar presented by

Sean K. Higgins

(Northwestern University)

Why Small Firms Fail to Adopt Profitable Opportunities

Co-authors:
Paul Gertler (UC Berkeley)

Ulrike Malmendier (UC Berkeley)

Waldo Ojeda (Baruch College, CUNY)

Thursday 17 August 2023

11.00am – 12.30pm

Level 6 Seminar Room (650)

A02 Social Sciences Building

Camperdown Campus
The University of Sydney NSW 2006

Zoom: 823 4469 9563

Passcode: 789391

Why do small firms often fail to adopt new profitable opportunities? We explore a setting in which standard economic frictions are removed but many firms still do not adopt a profitable opportunity, and study three other frictions: limited memory, present bias, and a lack of trust in other firms. In partnership with a financial technology (FinTech) company in Mexico, we randomly offer 34,000 firms that are already users of the payment technology the opportunity to be charged a lower merchant fee for each payment they receive from customers. The median value of the fee reduction is 3% of total firm profits. We randomly vary the size of the fee reduction, a deadline, a reminder, and advance notice of the reminder. While deadlines do not affect take-up, reminders increase take-up by 15%, and announced reminders by an additional 7%. Survey data help identify trust as the likely underlying mechanism behind the larger effect of the announced reminder: receiving an announced reminder increases firms’ perceptions of the offer’s value, and its treatment effect on take-up is stronger among firms that generally distrust advertised offers.

For further information contact: School seminar series coordinators
Ye Lu (ye.lu1@sydney.edu.au) & Alastair Fraser (alastair.fraser@sydney.edu.au)

For all upcoming seminars in School of Economics see Our events and Calendar