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

Sandip Mitra¹; Dilip Mookherjee²; Maximo Torero³; Sujata Visaria⁴

¹ Indian Statistical Institute, Kolkata · ² Boston University · ³ World Bank · ⁴ Hong Kong University of Science and Technology

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.

DOI

10.1162/rest_a_00699

Volume

100 (1)

Pages

1-13

Language

en

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BibTeX

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