Information Sharing and Oligopoly in Agricultural Markets: The Role of the Cooperative Bargaining Association

We study incentives for information sharing among agricultural intermediaries in imperfectly competitive markets for farm output. Information sharing always increases expected grower and total surplus, but may reduce expected intermediary profits. Even when expected profits increase with information sharing, intermediary firms face a prisoner's dilemma where it is privately rational to withhold information, given that other firms report truthfully. This equilibrium can be avoided if firms' information reports are verifiable, and if firms commit to an ex ante contract that enforces participation in information sharing. We show how agricultural bargaining legislation can implement such a contract with the bargained farm price representing a sufficient statistic of all information held by intermediary firms.