Digital platforms for buying and selling
agricultural commodities have generated significant interest in the
trade literature as a way to link rural communities to the Internet.
Yet, the extent to which these digital platforms actually translate
into higher commodity prices for producers remains an open research
question. We investigate this question by comparing transaction data
on trading various grades of coffee from a recently implemented
digital platform in India with similar transactions from a physical
commodity auction held weekly, and farm-gate prices in the coffee
producing regions of India. Although the digital platform prices
closely track the physical commodity auction prices, producers
obtain significantly higher prices when they sell the commodity
through the digital platform rather than at the farm-gate through
brokers who operate in their regions. However, coffee grades with
higher price volatility and premium coffee grades that require
face-to-face interactions to verify quality obtain lower prices on
the digital platform. Our results also indicate that market
participants who control the transaction obtain better prices. We
discuss the implications of our findings for governments and
platform providers.
Keywords: Digital divide, digital platforms, global IT,
commodity auctions, bargaining power, commodity trading