Millers, Commission Agents and Collusion in Grain Auction Markets: Evidence from Basmati Auctions in North India
AbstractThis 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.
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Bibliographic InfoPaper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 129.
Length: 34 pages
Date of creation: Sep 2004
Date of revision:
Find related papers by JEL classification:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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- Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
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