Competition in Agricultural Markets: An Experimental Approach

58 Pages Posted: 25 Apr 2017

See all articles by Lorenzo Casaburi

Lorenzo Casaburi

University of Zurich; Centre for Economic Policy Research (CEPR)

Tristan F. Reed

Harvard University - Department of Economics

Date Written: April 2017

Abstract

This paper presents an experimental approach to measure competition in agricultural markets, based on the random allocation of subsidies to competing traders. We compare prices of subsidized and unsubsidized crop traders to recover the key market structure parameter in a standard model of imperfect competition. By combining the experimental results with quasi-experimental estimates of the pass-through rate, we also estimate market size, or the effective number of traders competing for farmers' supply. In the context of the Sierra Leone cocoa industry, our results point to a competitive agricultural trading sector and suggest that the market size is substantially larger than the village.

The methodology developed in this paper uses purely individual-level treatment to shed light on market structure. This approach may be useful for the many cases in which market-level randomization is not feasible.

Keywords: Agricultural markets, Competition, field experiments., interlinked transactions, intermediaries

JEL Classification: F14, O13, Q13

Suggested Citation

Casaburi, Lorenzo and Reed, Tristan F., Competition in Agricultural Markets: An Experimental Approach (April 2017). CEPR Discussion Paper No. DP11985, Available at SSRN: https://ssrn.com/abstract=2957524

Lorenzo Casaburi (Contact Author)

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Tristan F. Reed

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

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