Multilayer of Suppliers Fixed Costs and Spatial Competition in the Upstream Market as a Source of Retailers Buying Power

Abstract

The present study is in the context of the new Model Agricultural Produce Market Committee (APMC) Act 2003, which aims at freedom of farmers to sell their products to the large private firms and bringing reforms in the wholesale ‘cash and carry’ and retail markets in India. The most important suggestions have remarked in the Economic survey 2014–2015 and outlined that state governments should be specially persuaded by the central government to provide policy support for alternative or special markets in the large private sector. Many states, including West Bengal, accepted the proposal and had opened the market for agricultural commodities for the large private sector. In this paper, we study a model of vertical restraints in the case of small farmers in West Bengal, India considering multilayer of fixed costs and monopoly power of the small as well as large traders in the vertical structure. JEL: D8, D43, L13