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Is the local wheat market a ‘market for lemons’? Certifying the supply of individual wheat farmers in Ethiopia

Author

Listed:
  • Banawe Plambou Anissa
  • Gashaw Abate
  • Tanguy Bernard

    (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique)

  • Erwin Bulte

Abstract

Bulking and mixing of smallholder supply dilutes incentives to supply high quality. We introduce wheat ‘grading and certification shops' in Ethiopia and use an auction design to gauge willingness-to-pay (WTP) for certification. Bids correlate positively with wheat quality, and ex ante notification of the opportunity of certification improves wheat quality. These findings suggest that local wheat markets resemble a ‘market for lemons', crippled by asymmetric information. However, aggregate WTP for grading and certification services does not re-coup the sum of fixed, flow and variable costs associated with running a single certification shop.

Suggested Citation

  • Banawe Plambou Anissa & Gashaw Abate & Tanguy Bernard & Erwin Bulte, 2021. "Is the local wheat market a ‘market for lemons’? Certifying the supply of individual wheat farmers in Ethiopia," Post-Print hal-03564937, HAL.
    • Handle: RePEc:hal:journl:hal-03564937
    DOI: 10.1093/erae/jbab018
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    Cited by:

    1. Jianyu Yu & Olivier Bonroy & Zohra Bouamra‐Mechemache, 2023. "Quality and quantity incentives under downstream contracts: A role for agricultural cooperatives?," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(4), pages 1176-1196, August.
    2. Thomas Reardon & Lenis Saweda O. Liverpool-Tasie & Bart Minten, 2021. "Quiet Revolution by SMEs in the midstream of value chains in developing regions: wholesale markets, wholesalers, logistics, and processing," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 13(6), pages 1577-1594, December.
    3. Sogn-Grundvåg, Geir & Zhang, Dengjun, 2023. "Commodities failing in auctions: The story of unsold cod in Norway," Journal of Commodity Markets, Elsevier, vol. 29(C).

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