A small farmer’s market choice in the presence of multiple markets: The Indian case
研究印度小农户在政府监管市场、企业自有市场和固定价格市场中的最优选择，发现利益错配导致质量努力不足和市场低效，提出合同农业可解决该问题。
We study a small farmer’s optimal market choice in the presence of multiple markets in an emerging economy. A small farmer sells her product through either of the three markets available: government-regulated market, corporate-owned market (a private market having high-quality requirements), and fixed-price market (a government procurement center). Using a dynamic game of incomplete information, we examine the impact of technology choice, quality effort, and yield quantity on the farmer’s market choice. We discuss the implications of the full information and asymmetric information case analysis with the help of real-life examples. We find out that the farmer does not put her optimal quality effort due to misalignment of stakeholder payoffs. We analytically prove that market inefficiency exists due to this misalignment; we subsequently propose that contract farming can eliminate this problem. We demonstrate that the corporate-owned and government-regulated markets have individual incentives to keep their markets segregated by maintaining different threshold quality requirements. We conduct a logistic regression analysis to explain the impact of various parameters on the small farmer’s market choice. It shows the impact of change in critical parameters on the small farmer’s optimal market choice. Our analysis allows policymakers to understand the behavior of small farmers as strategic players. Our study emphasizes the importance of the threshold quality requirement of markets and prices offered in these markets on a small farmer’s market choice rather than traditional factors such as transportation cost and minimum support price. We conduct field interviews of small farmers to augment our findings.