ADVERSE SELECTION IN DEVELOPING COUNTRY FACTOR MARKETS: THE CASE OF FERTILIZERS IN CAMBODIA

We analyze the presence and potential impact of low quality fertilizers, inadequate access to credit and market information on fertilizer market participation and application rates. We explain in theory and show empirically that farmers chose to abstain from the fertilizer market altogether or decrease their application rates below recommended levels because bad quality deters all buyers not willing to pay the market price for the average quality fertilizer available.