Incomplete Information and Product Quality in Rural Markets: Evidence from an Experimental Auction for Maize in Senegal

Quickly drying grains to a low, safe moisture content is key to increasing their storability and limiting the spread of aflatoxins, potent carcinogenic toxins for children, adults, and livestock. The extent to which people can observe and value moisture content in grain matters because it determines whether markets create the appropriate incentives for actors to dry maize to a safe level for storage. We use an experimental auction with traders and consumers in southern Senegal to elicit participants’ willingness to pay for maize of varying moisture content. Our results suggest that participants are willing to pay more for drier maize but are uncertain of their ability to detect moisture content without it being labeled through external verification. When maize is labeled with its moisture content, participants are willing to pay 22% more for dry maize than for maize that is still too wet to safely store. This includes a quality premium that more than compensates for the difference in density between wet and dry maize. Labeling maize with its moisture content or providing market agents with their own affordable and reliable way to determine moisture content could incentivize more parties to trade drier, safer maize.