Judging a book by its cover: an experiment about information asymmetry and trustworthiness in the Nigerian seed market

Smallholder farmers often underinvest in agricultural inputs, such as quality seed of improved varieties. One reason for this underinvestment is that farmers perceive the quality of agricultural inputs sold by agrodealers as inconsistent, leaving them exposed to the risk of purchasing ‘bad seed’. In the maize seed market, two types of packaging are common: unbranded (see-through) bags and branded bags. Farmers are aware that seed in unbranded bags is repacked by the agrodealer. In the Nigerian tomato seed market, we find three types of packaging: branded cans, branded pouches and unbranded pouches. Farmers strongly prefer the cans because they consider these to be tamper-proof. Thus, the different types of seed packaging represent varying levels of information asymmetry for farmers. Information asymmetry can lead to a lack of trust among farmers, causing them to avoid buying seed altogether, or to only purchase seed sold in cans or pouches from well-known brands. Alternatively, farmers may rely on signals from agrodealers and packaging to assess trustworthiness and quality as a way to cope with information asymmetry. This study has three objectives. First, we identify characteristics that influence farmers' perceptions of agrodealers' trustworthiness and the quality of their products. Second, we examine how the presence or absence of these signals impacts farmers' Willingness to Pay (WTP) for seed. We compare WTP for two types of maize seed (unbranded bags versus branded bags) and two types of tomato seed (branded cans versus branded pouches), exploring whether these signals play a smaller role in markets with less pronounced information asymmetry, and a larger role where asymmetry is more pronounced. Finally, we investigate whether the signals observed by farmers have predictive value regarding the quality of the seed sold by agrodealers.