Competition and Collusion in Grain Markets: Basmati Auctions in North India

Many small wholesale grain markets in India are characterized by large numbers of sellers and a relatively small number of buyers, thereby lending the price formation process open to manipulation through collusion. Government intervention limits the extent of such manipulation through the institution of regulated markets, where the rules of exchange are clearly spelled out and the price formation process is transparent. Unfortunately, recent studies that document how agricultural markets operate—especially in Northern India—and the extent to which they hinder or serve farmers, are rare. In this paper we attempt to fill this gap by studying the functioning of a regulated basmati paddy market in the state of Haryana in North India. [Working Paper No. 91]