Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya
This paper provides experimental evidence from Kenya on intermediary market structure
Abstract
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%. 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% of total surplus.
This work is part of the Private Enterprise Development in Low Income Countries (PEDL) programme
Citation
Bergquist Falcao, L., and Dinerstein, M. (2020) Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya. American Economic Review 2020, 110(12): 3705–3747 https://doi.org/10.1257/aer.20171397
Link
Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya