Markets are often seen as impersonal mechanisms of exchange, yet many real-world transactions are deeply social. This paper examines how prosocial motives interact with economic exchange and how this affects market outcomes. I study these questions in the context of street vending—a ubiquitous informal market in developing countries—combining multiple experiments with detailed observational data and surveys. Partnering with vendors in a field experiment, I show that buyers are twice as likely to purchase from children as from adults selling identical goods. Sellers, including children, anticipate these preferences, adjusting prices and whom they target. I develop and test a simple model that rationalizes these behaviors: buyers derive utility not only from consumption but also from altruism toward sellers and from avoiding the discomfort of refusal when solicited to buy. Experimental evidence supports both mechanisms and shows that sellers strategically leverage this to extract rents, creating an advantage for children in this market. More broadly, the findings show how social preferences influence market exchange, granting socioeconomically vulnerable sellers a form of market power in competitive environments.
Ronak Jain (Thu,) studied this question.