Description:
Using an experimental auction, we estimate demand for stress-tolerant rice varieties (STRVs), in eastern India, where frequent covariate production risks are affecting welfare of smallholder farmers. STRVs have potential to cope with low- to medium-intensity abiotic stresses and stabilize rice productivity in stress-prone rice ecosystems. The experiment involves a series of farmers’ decision-makings in the context of STRV seed purchase, set in an environment with minimal network/social frictions and improved information availability. Survival analysis, double hurdle, and sequential logit models are employed to understand farmers’ bidding and buying behavior. Results indicate that the demand for STRVs as estimated in the study is highly elastic and is similar to reported market behavior. By conditioning the seed buying process on the bidding amount to be more than the current market price, the estimates of double hurdle model indicate the strategic underbidding by latent buyers in the experiment. Information asymmetry resulting from lack of awareness and previous experience of using STRVs are found to be major reasons for such decisions. Given the high elasticity of demand, STRV seed market distortion through subsidy, price cue, and information campaign on variety characteristics and benefits could be effective policy towards addressing the constraints related to price and asymmetric information and increase adoption