Middleman margins and asymmetric information: an experiment with potato farmers in West Bengal
Mookherjee, Dilip; Mitra, Sandip; Visaria, Sujata; Torero, Maximo
West Bengal potato farmers cannot directly access wholesale markets and do not know wholesale prices. Local middlemen earn large margins; pass-through from wholesale to farm-gate prices is negligible. When we informed farmers in randomly chosen villages about wholesale prices, average farm-gate sales and priceswere unaffected, but pass-through to farm-gate 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.
↧
