Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya

Lauren Falcao Bergquist and Michael Dinerstein

American Economic Review, 2020, vol. 110, issue 12, 3705-47

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.

JEL-codes: L13 O13 Q11 Q12 Q13 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (50)

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DOI: 10.1257/aer.20171397

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