Second, price differences between wholesale and retail markets are higher than from farm‐gate to wholesale, likely due to a more substantial process of value addition in terms of transport, distribution, packaging, and marketing. Figure 31 in the Appendix shows the average difference across products for all of India. At first glance, the average price difference between wholesale and retail is larger than the average difference between farm‐gate and wholesale, despite the heterogeneity. However, price differences vary by state, so not all states have observed price differences that are larger between wholesale and retail, but most do. The average state level price difference varies between 10 percent in Andhra Pradesh to 60 percent in Haryana (See Figure 17).

Third, price wedges are _also_ heterogeneous across commodities, and within states **.** This is a common feature with the wedges observed for farm gate to wholesale. While for masur and wheat, wedges stand in the range 10‐20 percent, for tur arhar they stand at 80 percent, which, incidentally, displayed the lowest wedge at the farm‐gate/wholesale stage. This can also be seen by examining the dispersion of price wedges around the 10<sup>th</sup> and 90<sup>th</sup> percentile for a given state‐commodity pair. For example, for potatoes, price wedges in Punjab stand at 36 percent at the 10<sup>th</sup> percentile and at 133 percent at the 90<sup>th</sup> percentile; for onions, price wedges in Rajasthan stand at 35 percent at the 10th percentile and at 107 percent at the 90th percentile (Table 19).

Figure 17: Average price difference between wholesale and retail markets <!-- Start of picture text -->
1.00<br>0.80<br>0.60<br>0.40<br>0.20<br>0.00<br>‐0.20<br>‐0.40<br>‐0.60<br>Meghalaya Orissa Madhya Pradesh Jharkhand Andhra Pradesh Uttar Pradesh Kerala Karnataka Jammu And... Gujarat West Bengal Maharashtra Rajasthan Himachal Pradesh Punjab NCT of Delhi Haryana<br><!-- End of picture text -->

Note: The band around each bar represents the distribution of price differences. Each band represents the 25th and 75th percentile of the distribution of price differences for each state Source: Author’s calculations

# Our results in perspective: The literature on vertical integration in India

The Government of India conducted some analysis similar to the one in this paper in its 2015‐16 Economic Survey Volume I. Studying market segmentation and using similar data, the survey had three major findings. First, prices in India are widely dispersed and substantially more so than in comparator countries, including the United States. The study shows that the ratio between the highest and lowest price received by farmers is not equal to one. A ratio of one would signify that there is no price dispersion. A comparison of these ratios to US markets in both 1960 and 2012, shows that in India price dispersion is greater by about 45 percent to 100 percent. Second, products that are typically thought of as more perishable tend to have higher price wedges at all levels of the marketing chain. A comparison of prices between farm and wholesale shows that products such as potatoes, onions, and groundnuts had higher price wedges than pulses, which are relatively less perishable. Similarly, the analysis at the wholesale and retail level showed higher margins for more perishable products such as onions. Third, variation in price wedges is substantial across both states and commodities. The report 22