Middleman margins and asymmetric information: an experiment with potato farmers in West Bengal
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Citation (published version)Dilip Mookherjee, Sandip Mitra, Sujata Visaria, Maximo Torero. 2018. "Middleman Margins and Asymmetric Information: An Experiment with Potato Farmers in West Bengal." Review of Economics and Statistics, Volume 100, Issue 1,
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.