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

74 Pages Posted: 3 Oct 2016

See all articles by Sandip Mitra

Sandip Mitra

Indian Statistical Institute, New Delhi

Dilip Mookherjee

Boston University - Department of Economics

Maximo Torero

International Food Policy Research Institute (IFPRI)

Sujata Visaria

Hong Kong University of Science & Technology (HKUST)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2016

Abstract

In the Indian state of West Bengal, potato farmers sell to local middlemen because they lack direct access to wholesale markets. High-frequency marketing surveys reveal large middleman margins and negligible pass-through from wholesale to farmgate prices. Farmers are uninformed about downstream wholesale and retail prices. To test alternative models of farmer-middlemen trades, we conduct a field experiment where farmers in randomly chosen villages are provided with wholesale price information. Information had negligible average effects on farmgate sales and revenues, but increased pass-through from wholesale to farmgate prices. These results are consistent with a model of ex post bargaining between farmers and village middlemen where farmers also have the option of selling to other middlemen outside the village. They are inconsistent with models of risk-sharing contracts between middle-men and farmers, standard oligopolistic models of pass-through or search frictions.

Keywords: cellphones, Middlemen, Pass-Through, price information, supply chains

JEL Classification: L14, O12

Suggested Citation

Mitra, Sandip and Mookherjee, Dilip and Torero, Maximo and Visaria, Sujata, Asymmetric Information and Middleman Margins: An Experiment with Indian Potato Farmers (September 2016). CEPR Discussion Paper No. DP11548, Available at SSRN: https://ssrn.com/abstract=2847082

Sandip Mitra (Contact Author)

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

Sujata Visaria

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

Clearwater Bay
Kowloon, 999999
Hong Kong

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