Asymmetric Information and Middleman Margins: An Experiment with Indian Potato Farmers

66 Pages Posted: 6 Aug 2015

See all articles by Sujata Visaria

Sujata Visaria

Hong Kong University of Science & Technology (HKUST)

Sandip Mitra

Indian Statistical Institute, New Delhi

Dilip Mookherjee

Boston University - Department of Economics

Maximo Torero

International Food Policy Research Institute (IFPRI)

Multiple version iconThere are 2 versions of this paper

Date Written: August 4, 2015

Abstract

In the Indian state of West Bengal, potato farmers sell to local middlemen because they lack direct access to wholesale markets. In high-frequency farmer marketing surveys we find that farmers are poorly informed about wholesale and retail prices, and there is a large gap between wholesale and farmgate prices. To test alternative models of farmer-middlemen trades, we conduct a field experiment providing farmers in randomly chosen villages with market price information. Information provision had negligible average effects on farmgate sales and revenues, but increased pass-through from wholesale to farmgate prices. The results are inconsistent with models of risk-sharing via contracts between middlemen and farmers. They are consistent with a model of ex post bargaining and sequential price competition between a cartel of village middlemen and a cartel of external middlemen.

Keywords: agricultural finance, middlemen, price competition, wholesale markets

JEL Classification: O12, L14

Suggested Citation

Visaria, Sujata and Mitra, Sandip and Mookherjee, Dilip and Torero, Maximo, Asymmetric Information and Middleman Margins: An Experiment with Indian Potato Farmers (August 4, 2015). HKUST IEMS Working Paper No. 2015-29, Available at SSRN: https://ssrn.com/abstract=2639972 or http://dx.doi.org/10.2139/ssrn.2639972

Sujata Visaria (Contact Author)

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Sandip Mitra

Indian Statistical Institute, New Delhi ( email )

7, S.J.S. Sansanwal Marg
New Delhi
India

Dilip Mookherjee

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-4392 (Phone)
617-353-4143 (Fax)

Maximo Torero

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

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