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Asymmetric Information and Middleman Margins: An Experiment with Indian Potato Farmers

Author

Listed:
  • Sandip Mitra

    (Indian Statistical Institute, Kolkata)

  • Dilip Mookherjee

    (Boston University)

  • Maximo Torero

    (World Bank)

  • Sujata Visaria

    (Hong Kong University of Science and Technology)

Abstract

West Bengal potato farmers cannot directly access wholesale markets and do not knowwholesale prices. Local middlemen earn large margins; pass-through from wholesale to farmgate prices is negligible. When we informed farmers in randomly chosen villages about wholesale prices, average farmgate sales and prices were unaffected, but pass-through to farmgate prices increased. These results can be explained by a model where farmers bargain ex post with village middlemen, with the outside option of selling to middlemen outside the village. They are inconsistent with standard oligopolistic models of pass-through, search frictions, or risk-sharing contracts.

Suggested Citation

  • Sandip Mitra & Dilip Mookherjee & Maximo Torero & Sujata Visaria, 2018. "Asymmetric Information and Middleman Margins: An Experiment with Indian Potato Farmers," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 1-13, March.
    • Handle: RePEc:tpr:restat:v:100:y:2018:i:1:p:1-13
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00699
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    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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