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Is Knowledge Power? Information and Switching Costs in Agricultural Markets
Author(s) -
Mitchell Tara
Publication year - 2017
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aax035
Subject(s) - monotonic function , microeconomics , agriculture , channel (broadcasting) , market power , economics , business , field (mathematics) , power (physics) , industrial organization , computer science , telecommunications , mathematical analysis , ecology , physics , mathematics , quantum mechanics , pure mathematics , biology , monopoly
This article investigates an important channel through which access to information about market prices could increase the prices that producers receive from middlemen. I develop a model of trade between a farmer and a middleman, allowing for middlemen to differ in terms of their social preferences, and provide an empirical test of the theory using a framed field experiment carried out in India. The model predicts a non‐monotonic relationship between the benefit of information and the cost of switching to a new middleman. I find that actual middlemen do differ with regard to their social preferences, and that the benefit of information to the farmer varies with the cost of switching. While it is not possible to confirm a non‐monotonic relationship between the benefit of information and the cost of switching based on these data, the results are consistent with the predictions of the model.