Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya
American Economic Review
vol. 110,
no. 12, December 2020
(pp. 3705-47)
(Complimentary)
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 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.Citation
Bergquist, Lauren Falcao, and Michael Dinerstein. 2020. "Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya." American Economic Review, 110 (12): 3705-47. DOI: 10.1257/aer.20171397Additional Materials
JEL Classification
- L13 Oligopoly and Other Imperfect Markets
- O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
- Q11 Agriculture: Aggregate Supply and Demand Analysis; Prices
- Q12 Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q13 Agricultural Markets and Marketing; Cooperatives; Agribusiness