A Model of Non-Interlinkage between a Trader and a Large Farmer in a Nash Bargaining Framework

The paper develops a model of non-interlinkage between a trader and a large farmer. The trader faces better terms in the product market while the farmer has a clear edge over the former in the credit market. The paper shows that there are still gains from trade between the two, using a Nash bargaining framework, if the trader is a price-taker in the product market. A credit subsidy policy raises the income levels of both the players. On the contrary, if the product market is imperfectly competitive, there may not exist any gains from trade between the two players. If there are still gains from trade, a credit subsidy policy raises the level of income of the farmer but may fail to increase that of the trader