Asymmetric information and middleman margins: An experiment with Indian potato farmers

Article Type

Research Article

Publication Title

Review of Economics and Statistics

Abstract

West Bengal potato farmers cannot directly access wholesale markets and do not knowwholesale prices. Local middlemen earn large margins; pass-through from wholesale to farmgate prices is negligible. When we informed farmers in randomly chosen villages about wholesale prices, average farmgate sales and prices were unaffected, but pass-through to farmgate prices increased. These results can be explained by a model where farmers bargain ex post with village middlemen, with the outside option of selling to middlemen outside the village. They are inconsistent with standard oligopolistic models of pass-through, search frictions, or risk-sharing contracts.

First Page

1

Last Page

13

DOI

10.1162/REST_a_00699

Publication Date

3-1-2018

Comments

All Open Access, Green

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