IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/11548.html
   My bibliography  Save this paper

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

Author

Listed:
  • Mitra, Sandip
  • Mookherjee, Dilip
  • Torero, Maximo
  • Visaria, Sujata

Abstract

In the Indian state of West Bengal, potato farmers sell to local middlemen because they lack direct access to wholesale markets. High-frequency marketing surveys reveal large middleman margins and negligible pass-through from wholesale to farmgate prices. Farmers are uninformed about downstream wholesale and retail prices.To test alternative models of farmer-middlemen trades, we conduct a field experiment where farmers in randomly chosen villages are provided with wholesale price information. Information had negligible average effects on farmgate sales and revenues, but increased pass-through from wholesale to farmgate prices. These results are consistent with a model of ex post bargaining between farmers and village middlemen where farmers also have the option of selling to other middlemen outside the village. They are inconsistent with models of risk-sharing contracts between middle-men and farmers, standard oligopolistic models of pass-through or search frictions.

Suggested Citation

  • Mitra, Sandip & Mookherjee, Dilip & Torero, Maximo & Visaria, Sujata, 2016. "Asymmetric Information and Middleman Margins: An Experiment with Indian Potato Farmers," CEPR Discussion Papers 11548, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11548
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11548
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Maitra, Pushkar & Mitra, Sandip & Mookherjee, Dilip & Motta, Alberto & Visaria, Sujata, 2017. "Financing smallholder agriculture: An experiment with agent-intermediated microloans in India," Journal of Development Economics, Elsevier, vol. 127(C), pages 306-337.
    2. Nakasone, Eduardo, 2013. "The Role of Price Information in Agricultural Markets: Experimental Evidence from Rural Peru," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150418, Agricultural and Applied Economics Association.
    3. Marina Halac, 2012. "Relational Contracts and the Value of Relationships," American Economic Review, American Economic Association, vol. 102(2), pages 750-779, April.
    4. Saenger, Christoph & Torero, Maximo & Qaim, Matin, 2016. "Impact of third-party enforcement of contracts in agricultural markets—A field experiment in Vietnam," IFPRI book chapters, in: Devaux, André & Torero, Maximo & Donovan, Jason & Horton, Douglas E. (ed.), Innovation for inclusive value-chain development: Successes and challenges, chapter 11, pages 343-374, International Food Policy Research Institute (IFPRI).
    5. Rocco Macchiavello & Ameet Morjaria, 2015. "The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports," American Economic Review, American Economic Association, vol. 105(9), pages 2911-2945, September.
    6. Morisset, Jacques, 1998. "Unfair Trade? The Increasing Gap between World and Domestic Prices in Commodity Markets during the Past 25 Years," World Bank Economic Review, World Bank Group, vol. 12(3), pages 503-526, September.
    7. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528-583.
    8. Gita Gopinath & Oleg Itskhoki, 2011. "In Search of Real Rigidities," NBER Chapters, in: NBER Macroeconomics Annual 2010, Volume 25, pages 261-309, National Bureau of Economic Research, Inc.
    9. Céline Bonnet & Pierre Dubois, 2010. "Inference on vertical contracts between manufacturers and retailers allowing for nonlinear pricing and resale price maintenance," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 139-164, March.
    10. Blouin, Arthur & Macchiavello, Rocco, 2014. "Tropical Lending: International Prices, Strategic Default and Credit Constraints among Coffee Washing Stations," CAGE Online Working Paper Series 211, Competitive Advantage in the Global Economy (CAGE).
    11. Aparajita Goyal, 2010. "Information, Direct Access to Farmers, and Rural Market Performance in Central India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 22-45, July.
    12. Atkin, David & Donaldson, Dave, 2015. "Who’s Getting Globalized? The Size and Implications of Intra-national Trade Costs," CEPR Discussion Papers 10759, C.E.P.R. Discussion Papers.
    13. Oliver D. Hart, 1983. "Optimal Labour Contracts under Asymmetric Information: An Introduction," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 3-35.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wouter Zant, 2018. "Mobile Phones and Mozambique Farmers: Less Asymmetric Information and More Trader Competition?," Tinbergen Institute Discussion Papers 18-055/V, Tinbergen Institute, revised 27 Oct 2019.
    2. Pierluigi Montalbano & Rebecca Pietrelli & Luca Salvatici, 2017. "Market chain participation and food security: the case of the Ugandan maize farmers," Working Papers 2/17, Sapienza University of Rome, DISS.
    3. Hyejin Ku, 2018. "The Effect of Wage Subsidies on Piece Rate Workers: Evidence from the Penny Per Pound Program in Florida," CReAM Discussion Paper Series 1815, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    4. Pushkar Maitra & Sandip Mitra & Dilip Mookherjee & Sujata Visaria, 2020. "Decentralized Targeting of Agricultural Credit Programs: Private versus Political Intermediaries," NBER Working Papers 26730, National Bureau of Economic Research, Inc.
    5. Camacho, Adriana & Conover, Emily, 2019. "The impact of receiving SMS price and weather information on small scale farmers in Colombia," World Development, Elsevier, vol. 123(C), pages 1-1.
    6. Emran, M.Shahe & Mookherjee, Dilip & Shilpi, Forhad & Uddin, M. Helal, 2017. "Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh," MPRA Paper 79844, University Library of Munich, Germany.
    7. Macchiavello, Rocco & Miquel-Florensa, Josepa, 2017. "Vertical Integration and Relational Contracts: Evidence from the Costa Rica Coffee Chain," CAGE Online Working Paper Series 321, Competitive Advantage in the Global Economy (CAGE).
    8. repec:cpr:ceprdp:14272 is not listed on IDEAS
    9. Maitra, Pushkar & Mitra, Sandip & Mookherjee, Dilip & Motta, Alberto & Visaria, Sujata, 2017. "Financing smallholder agriculture: An experiment with agent-intermediated microloans in India," Journal of Development Economics, Elsevier, vol. 127(C), pages 306-337.
    10. Gashaw Tadesse Abate & Tanguy Bernard & Alan de Brauw & Nicholas Minot, 2018. "The impact of the use of new technologies on farmers’ wheat yield in Ethiopia: evidence from a randomized control trial," Agricultural Economics, International Association of Agricultural Economists, vol. 49(4), pages 409-421, July.
    11. Maitra, Pushkar & Mitra, Sandip & Mookherjee, Dilip & Visaria, Sujata, 2020. "Decentralized Targeting of Agricultural Credit Programs: Private versus Political Intermediaries," Discussion paper series HIAS-E-94, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    12. Hailemariam Ayalew & Dagim G. Belay, 2020. "The Ethiopian Commodity Exchange and Spatial Price Dispersion: Disentangling Warehouse and Price Information effects," IFRO Working Paper 2020/01, University of Copenhagen, Department of Food and Resource Economics.
    13. Uwe Deichmann & Aparajita Goyal & Deepak Mishra, 2016. "Will digital technologies transform agriculture in developing countries?," Agricultural Economics, International Association of Agricultural Economists, vol. 47(S1), pages 21-33, November.
    14. Kotowski, Maciej H. & Leister, C. Matthew, 2018. "Trading Networks and Equilibrium Intermediation," Working Paper Series rwp18-001, Harvard University, John F. Kennedy School of Government.
    15. Pushkar Maitra & Sandip Mitra & Dilip Mookherjee & Sujata Visaria, 2020. "Decentralized Targeting of Agricultural Credit Programs: Private versus Political Intermediaries," HKUST IEMS Working Paper Series 2020-70, HKUST Institute for Emerging Market Studies, revised Jan 2020.
    16. Ku, Hyejin, 2019. "The effect of wage subsidies on piece rate workers: Evidence from the Penny Per Pound program in Florida," Journal of Development Economics, Elsevier, vol. 139(C), pages 122-134.

    More about this item

    Keywords

    cellphones; Middlemen; Pass-Through; price information; supply chains;

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:11548. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.