Measurement of Collusion in the Agricultural Commodity Auction Markets

Abstract

This paper derives a method of measuring the degree of collusion among the bidders in an open ascending repetitive price auction in agricultural commodity markets in India. The paper first derives the theoretical structure of the bidders' behavior and thereafter derives a measure of collusion formation. Finally, degree of cartel has been computed using time series wholesale price data of potato and onion crops. The findings of the present research are useful for the study to link between the supply of the agriculture commodity and the degree of collusion. Using the proposed method in the present research, if the APMC measures cartel for each market and publish periodically, it will help the farmers to choose the right market to sell the produce. The farmers would select the market where the degree of collusion is relatively lower. Identification of different small cartel groups at different times with respective to the supply of the agriculture commodity would help to avoid the incidence of distress selling by farmers, which is the main hindrance in the development of farming community in India.