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Competition in agricultural markets: an experimental approach


Casaburi, Lorenzo; Reed, Tristan F (2017). Competition in agricultural markets: an experimental approach. CEPR Discussion Papers 11985, Centre for Economic Policy Research.

Abstract

This paper develops an experimental approach to measure competition among intermediaries in agricultural markets, based on the random allocation of subsidies to traders. We show that, in individual-level randomizations with competitive spillovers, treatment-control differences in prices can inform an intuitive test of the degree of differentiation among firms. In the context of the Sierra Leone cocoa industry, traders compete by providing farmers credit, as well as through prices. Even when accounting for both the price and the credit margin, differentiation among traders is low. By combining the experimental results with quasi-experimental estimates of the pass-through rate, we then estimate market size the effective number of traders competing for farmers' supply and we find it to be substantially larger than the village. These results are consistent with a view of competitive agricultural markets.

Abstract

This paper develops an experimental approach to measure competition among intermediaries in agricultural markets, based on the random allocation of subsidies to traders. We show that, in individual-level randomizations with competitive spillovers, treatment-control differences in prices can inform an intuitive test of the degree of differentiation among firms. In the context of the Sierra Leone cocoa industry, traders compete by providing farmers credit, as well as through prices. Even when accounting for both the price and the credit margin, differentiation among traders is low. By combining the experimental results with quasi-experimental estimates of the pass-through rate, we then estimate market size the effective number of traders competing for farmers' supply and we find it to be substantially larger than the village. These results are consistent with a view of competitive agricultural markets.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:F14, O13, Q13
Uncontrolled Keywords:Agricultural markets; competition; field experiments; interlinked transactions; intermediaries
Language:English
Date:April 2017
Deposited On:22 Dec 2017 11:50
Last Modified:19 Mar 2018 09:26
Series Name:CEPR Discussion Papers
Number of Pages:58
ISSN:0265-8003
OA Status:Green

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