The AEA is providing open access to all journal content on the AEA website through August 2020 to overcome any difficulties some may have accessing library subscriptions during these challenging times.
The AEA is providing open access to all journal content on the AEA website through August 2020 to overcome any difficulties some may have accessing library subscriptions during these challenging times.
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.