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Millers, Commission Agents and Collusion in Grain Auction Markets: Evidence from Basmati Auctions in North India

Author

Listed:
  • A. BANERJI

    (Delhi School of Economics)

  • J. V. MEENAKSHI

    (Delhi School of Economics)

Abstract

This paper undertakes structural estimation of asymmetric auction models in a market for basmati, and detects the presence of a cartel consisting of a large (in market share) local miller and commission agents purchasing for large distant millers. The contracts between the distant millers and their commission agents help to explain the specific form that collusion takes. Simulations indicate that (i) the cartel gains considerably by colluding, over the competitive outcome; (ii) however, sellers (farmers) do not lose significantly under collusion when the commission agents bid; (iii) a knowledgeable auctioneer would choose much higher starting prices for auctions when commission agents bid, compared with the observed starting prices. The paper also shows that efficient collusion, the form of collusion commonly assumed in the literature, does not explain the data well.

Suggested Citation

  • A. Banerji & J. V. Meenakshi, 2004. "Millers, Commission Agents and Collusion in Grain Auction Markets: Evidence from Basmati Auctions in North India," Working papers 129, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:129
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    References listed on IDEAS

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    5. Kenneth Hendricks & Robert H. Porter, 1989. "Collusion in Auctions," Annals of Economics and Statistics, GENES, issue 15-16, pages 217-230.
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    Citations

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    Cited by:

    1. Paul Klemperer, 2007. "Bidding Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 3(1), pages 1-47.
    2. Meenakshi, J.V. & Banerji, A., 2005. "The unsupportable support price: an analysis of collusion and government intervention in paddy auction markets in North India," Journal of Development Economics, Elsevier, vol. 76(2), pages 377-403, April.
    3. Aparajita Goyal, 2010. "Information, Direct Access to Farmers, and Rural Market Performance in Central India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 22-45, July.
    4. Songsermsawas, Tisorn & Baylis, Kathy & Chhatre, Ashwini & Michelson, Hope & Prasanna, Satya, 2015. "Friends or traders? Do social networks explain the use of market mechanisms by farmers in India," 2015 Conference, August 9-14, 2015, Milan, Italy 211206, International Association of Agricultural Economists.

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    More about this item

    Keywords

    Auctions; Cartels; Agricultural Markets.;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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