Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya

By Lauren Falcao Bergquist, Michael Dinerstein. The American Economic Review, 2020

172 citations recorded by the source corpus.

African agricultural markets are characterized by low farmer revenues and high consumer food prices. Many have worried that this wedge is partially driven by imperfect competition among intermediaries. This paper provides experimental evidence from Kenya on intermediary market structure. Randomized cost shocks and demand subsidies are used to identify a structural model of market competition. Estimates reveal that traders act consistently with joint profit maximization and earn median markups of 39 percent. Exogenously induced firm entry has negligible effects on prices, and low take-up of subsidized entry offers implies large fixed costs. We estimate that traders capture 82 percent of total surplus. (JEL L13, O13, Q11, Q12, Q13)

Subfields: Accounting, Economics and Econometrics, Marketing

View Paper: https://www.semanticscholar.org/paper/5b6ddb422ad48ed796cb9669bd1f104a554bd4ff

Citations in the corpus

• Using agriculture for development: Supply- and demand-side approaches (2020, unknown): “Local markets may also not be competitive, with the possibility of extensive collusion among merchants as shown by Bergquist (2017) in Kenya using an experiment exogenously varying the number of merchants on local markets with no consequent impact on price.”