There is often a lack of reliable high quality provision in many markets in developing countries.
I designed an experiment to understand this phenomenon in a setting that features typical market
conditions in a developing country: the retail watermelon market in a major Chinese city. I begin
by demonstrating empirically that there is substantial asymmetric information between sellers and
buyers on sweetness, the key indicator of quality for watermelons, yet sellers do not sort and price
watermelons by quality. I then randomly introduce one of two branding technologies into 40 out
of 60 markets—one sticker label that is widely used and often counterfeited and one novel laser-cut
label. I track sellers’ quality, pricing and sales over an entire season and collect household panel
purchasing data to examine the demand side’s response. I find that laser branding induced sellers
to provide higher quality and led to higher sales profits, establishing that reputational incentives
are present and can be made to pay. However, after the intervention was withdrawn, all markets
reverted back to baseline. To rationalize the experimental findings, I build an empirical model
of consumer learning and seller reputation. The structural estimates suggest that consumers are
hesitant to upgrade their perception about quality under the existing branding technology, which
makes reputation building a low return investment. While the new technology enhances consumer
learning, the resulting increase in profits is not sufficient to cover the fixed cost of the technology
for small individual sellers. Counterfactual analysis shows that information frictions and fragmented
markets lead to significant under-provision of quality. Third-party interventions that subsidize initial
reputation building for sellers could improve welfare.