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Is Knowledge Power? Information and Switching Costs in Agricultural Markets

Author

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  • Tara Mitchell

Abstract

This article investigates an important channel through which access to information about market prices could increase the prices that producers receive from middlemen. I develop a model of trade between a farmer and a middleman, allowing for middlemen to differ in terms of their social preferences, and provide an empirical test of the theory using a framed field experiment carried out in India. The model predicts a non-monotonic relationship between the benefit of information and the cost of switching to a new middleman. I find that actual middlemen do differ with regard to their social preferences, and that the benefit of information to the farmer varies with the cost of switching. While it is not possible to confirm a non-monotonic relationship between the benefit of information and the cost of switching based on these data, the results are consistent with the predictions of the model.

Suggested Citation

  • Tara Mitchell, 2017. "Is Knowledge Power? Information and Switching Costs in Agricultural Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 99(5), pages 1307-1326.
    • Handle: RePEc:oup:ajagec:v:99:y:2017:i:5:p:1307-1326.
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    File URL: http://hdl.handle.net/10.1093/ajae/aax035
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    Citations

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    Cited by:

    1. Gloria Solano Hermosilla & Pavel Ciaian & Jonas Kathage, 2019. "Market transparency: Costs of external data reporting by private operators in the EU agri-food supply chain - A survey-based analysis," JRC Research Reports JRC116927, Joint Research Centre.
    2. Pallavi Rajkhowa & Lukas Kornher, 2023. "Effects of electronic markets on prices, spikes in prices, and price dispersion: A case study of the tea market in India," Agribusiness, John Wiley & Sons, Ltd., vol. 39(4), pages 1117-1138, October.
    3. Jianjun Wang & Ning Cao & Yulu Wang & Yu Wang, 2022. "The Impact of Knowledge Power on Enterprise Breakthrough Innovation: From the Perspective of Boundary-Spanning Dual Search," Sustainability, MDPI, vol. 14(17), pages 1-19, September.
    4. Solano-Hermosilla, Gloria & Barreiro-Hurle, Jesus & Adewopo, Julius B. & Gorrín-González, Celso, 2022. "Increasing engagement in price crowdsourcing initiatives: Using nudges in Nigeria," World Development, Elsevier, vol. 152(C).
    5. Siddique, Abu & Vlassopoulos, Michael & Zenou, Yves, 2023. "Market competition and discrimination," European Economic Review, Elsevier, vol. 152(C).
    6. Ranjan, Ram, 2017. "Challenges to Farm Produce Marketing: A Model of Bargaining between Farmers and Middlemen under Risk," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 42(3), September.
    7. Thomas Kopp, 2022. "When switching costs cause market power: Rubber processing in Indonesia," Agricultural Economics, International Association of Agricultural Economists, vol. 53(3), pages 481-495, May.

    More about this item

    Keywords

    Agriculture; economic development; information; information technology; middlemen; moral norms; switching costs;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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