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

Author

Listed:
  • Sandip Mitra

    (Sampling and Ocial Statistics Unit, Indian Statistical Institute)

  • Dilip Mookherjee

    (Department of Economics, Boston University)

  • Maximo Torero

    (International Food Policy Research Institute)

  • Sujata Visaria

    (Department of Economics, Hong Kong University of Science and Technology
    Institute for Emerging Market Studies, Hong Kong University of Science and Technology)

Abstract

In the Indian state of West Bengal, potato farmers sell to local middlemen because they lack direct access to wholesale markets. In high-frequency farmer marketing surveys we find that farmers are poorly informed about wholesale and retail prices, and there is a large gap between wholesale and farmgate prices. To test alternative models of farmer-middlemen trades, we conduct a field experiment providing farmers in randomly chosen villages with market price information. Information provision had negligible average effects on farmgate sales and revenues, but increased pass-through from wholesale to farmgate prices. The results are inconsistent with models of risk-sharing via contracts between middlemen and farmers. They are consistent with a model of ex post bargaining and sequential price competition between a cartel of village middlemen and a cartel of external middlemen.

Suggested Citation

  • Sandip Mitra & Dilip Mookherjee & Maximo Torero & Sujata Visaria, 2015. "Asymmetric Information and Middleman Margins: An Experiment with Indian Potato Farmers," HKUST IEMS Working Paper Series 2015-29, HKUST Institute for Emerging Market Studies, revised Aug 2015.
    • Handle: RePEc:hku:wpaper:201529
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    agricultural finance; agent based lending; group lending; selection; repayment;
    All these keywords.

    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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