Asymmetric information and middleman margins: an experiment with indian potato farmers
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Citation (published version)Sandip Mitra, Dilip Mookherjee, Maximo Torero, Sujata Visaria. 2018. "Asymmetric Information and Middleman Margins: An Experiment with Indian Potato Farmers." REVIEW OF ECONOMICS AND STATISTICS, Volume 100, Issue 1, pp. 1 - 13 (13). https://doi.org/10.1162/REST_a_00699
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.