A number of recent empirical papers have investigated the effects of better
market information on producer prices, although results are mixed. However,
few of these studies are able to model explicitly how a farmer can use price
information when bargaining with a middleman. It is normally assumed that
the farmer receives a higher price when he is informed because he is risk averse.
However, since the variability of the price that he receives will also be higher, it
is not clear that the farmer will be better off when he is informed. In this paper,
I develop a theoretical model to demonstrate how market information can lead
to an increase in the price that a farmer receives from middlemen through a
different channel. The approach allows for the presence of different types of
middlemen, and for farmers to switch to a different buyer between periods. The
paper provides an empirical test of the theory from an original framed field
experiment carried out with actual farmers and middlemen in Gujarat, India