Farmer Bargaining Power and Market Information Services

In many Sub-Saharan African countries, farmers typically have a choice between selling their products to traders who travel between villages and markets and transporting their products to the nearest market themselves. Because of communities' remoteness and poor communications with marketplaces, farmers' uncertainty about market prices is usually high. Traders may take advantage of farmers' ignorance of the market price and extract a rent from them by offering very low prices for their products. In this article, we model bargaining interactions between farmers and traders meeting at the farmgate and we study how price information affects the bargain and the balance of power. We show the conditions for Market Information Services (MIS) to be profitable for farmers and examine efficiency issues associated with asymmetric information. Finally, we test the model's prediction that information results in positive individual gain for farmers using original survey data collected in the Northern region of Ghana. Specifically, we estimate the causal effect of a mobile-based MIS program on farmers' marketing performances and find that farmers who have benefited from the MIS program received significantly higher prices for maize and groundnuts: about 10% more for maize and 7% more for groundnuts than what they would have received had they not participated in the MIS program. These results suggest that the theoretical conditions for successful farmer use of MIS may be met in the field.