Information Sharing and Oligopoly in Agricultural Markets: The Role of Bargaining Associations

Brent Hueth, Philippe Marcoul
September 2002  [02-WP 313]

We study incentives for information sharing (about uncertain future demand for final output) among firms in imperfectly competitive markets for farm output. Information sharing generally leads to increases in expected total welfare but may reduce expected firm profits. Even when expected firm profits increase, information sharing does not represent equilibrium behavior because firms face a prisoner's dilemma in which it is privately rational for each firm to withhold information, given that other firms report truthfully. This equilibrium can be overcome if firms commit to simultaneously reporting their information and if reports are verifiable. We argue that agricultural bargaining associations serve both these roles.

Keywords: agricultural markets, bargaining, imperfect competition, information sharing

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