[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v311y2023i2p739-753.html
   My bibliography  Save this article

A small farmer’s market choice in the presence of multiple markets: The Indian case

Author

Listed:
  • Pagare, Dewang
  • Biswas, Indranil
  • Agrahari, Amit
  • Ghosh, Sriparna
Abstract
We study a small farmer’s optimal market choice in the presence of multiple markets in an emerging economy. A small farmer sells her product through either of the three markets available: government-regulated market, corporate-owned market (a private market having high-quality requirements), and fixed-price market (a government procurement center). Using a dynamic game of incomplete information, we examine the impact of technology choice, quality effort, and yield quantity on the farmer’s market choice. We discuss the implications of the full information and asymmetric information case analysis with the help of real-life examples. We find out that the farmer does not put her optimal quality effort due to misalignment of stakeholder payoffs. We analytically prove that market inefficiency exists due to this misalignment; we subsequently propose that contract farming can eliminate this problem. We demonstrate that the corporate-owned and government-regulated markets have individual incentives to keep their markets segregated by maintaining different threshold quality requirements. We conduct a logistic regression analysis to explain the impact of various parameters on the small farmer’s market choice. It shows the impact of change in critical parameters on the small farmer’s optimal market choice. Our analysis allows policymakers to understand the behavior of small farmers as strategic players. Our study emphasizes the importance of the threshold quality requirement of markets and prices offered in these markets on a small farmer’s market choice rather than traditional factors such as transportation cost and minimum support price. We conduct field interviews of small farmers to augment our findings.

Suggested Citation

  • Pagare, Dewang & Biswas, Indranil & Agrahari, Amit & Ghosh, Sriparna, 2023. "A small farmer’s market choice in the presence of multiple markets: The Indian case," European Journal of Operational Research, Elsevier, vol. 311(2), pages 739-753.
    • Handle: RePEc:eee:ejores:v:311:y:2023:i:2:p:739-753
    DOI: 10.1016/j.ejor.2023.05.012
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221723003764
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2023.05.012?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. A. Banerji & J.V. Meenakshi, 2004. "Buyer Collusion and Efficiency of Government Intervention in Wheat Markets in Northern India: An Asymmetric Structural Auctions Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 236-253.
    2. Marcel Fafchamps & Ruth Vargas Hill & Bart Minten, 2008. "Quality control in nonstaple food markets: evidence from India," Agricultural Economics, International Association of Agricultural Economists, vol. 38(3), pages 251-266, May.
    3. Pierre Courtois & Julie Subervie, 2015. "Farmer Bargaining Power and Market Information Services," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(3), pages 953-977.
    4. Prashant Chintapalli & Christopher S. Tang, 2022. "Crop minimum support price versus cost subsidy: Farmer and consumer welfare," Production and Operations Management, Production and Operations Management Society, vol. 31(4), pages 1753-1769, April.
    5. Prankur Gupta & Reetika Khera & Sudha Narayanan, 2021. "Minimum Support Prices in India: Distilling the Facts," Journal, Review of Agrarian Studies, vol. 11(1), pages 48-71, January-J.
    6. Maitrayee Mukerji, 2013. "e-Choupal, Maharashtra," Palgrave Macmillan Books, in: ICTs and Development, chapter 6, pages 90-113, Palgrave Macmillan.
    7. Giuliano Paola & Scalise Diego, 2009. "The Political Economy of Agricultural Market Reforms in Developing Countries," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-27, August.
    8. Duygu Akkaya & Kostas Bimpikis & Hau Lee, 2021. "Government Interventions to Promote Agricultural Innovation," Manufacturing & Service Operations Management, INFORMS, vol. 23(2), pages 437-452, March.
    9. Schipmann, Christin & Qaim, Matin, 2011. "Modern food retailers and traditional markets in developing countries: Comparing quality, prices, and competition strategies in Thailand," GlobalFood Discussion Papers 108348, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    10. William Schmidt & Vishal Gaur & Richard Lai & Ananth Raman, 2015. "Signaling to Partially Informed Investors in the Newsvendor Model," Production and Operations Management, Production and Operations Management Society, vol. 24(3), pages 383-401, March.
    11. Saed Alizamir & Foad Iravani & Hamed Mamani, 2019. "An Analysis of Price vs. Revenue Protection: Government Subsidies in the Agriculture Industry," Management Science, INFORMS, vol. 65(1), pages 32-49, January.
    12. Tang, Christopher S. & Sodhi, ManMohan S. & Formentini, Marco, 2016. "An analysis of partially-guaranteed-price contracts between farmers and agri-food companies," European Journal of Operational Research, Elsevier, vol. 254(3), pages 1063-1073.
    13. Singh, Sukhpal, 2002. "Contracting Out Solutions: Political Economy of Contract Farming in the Indian Punjab," 2002 ASAE 3rd International Conference, October 18-20, Jaipur, India 294714, Asian Society of Agricultural Economists (ASAE).
    14. Awi Federgruen & Upmanu Lall & A. Serdar Şimşek, 2019. "Supply Chain Analysis of Contract Farming," Manufacturing & Service Operations Management, INFORMS, vol. 21(2), pages 361-378, April.
    15. Sarkar, Abhirup, 1993. "On the formation of agricultural prices," Journal of Development Economics, Elsevier, vol. 41(1), pages 1-17, June.
    16. Schipmann, Christin & Qaim, Matin, 2011. "Supply chain differentiation, contract agriculture, and farmers’ marketing preferences: the case of sweet pepper in Thailand," GlobalFood Discussion Papers 108349, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    17. Ming Hu & Yan Liu & Wenbin Wang, 2019. "Socially Beneficial Rationality: The Value of Strategic Farmers, Social Entrepreneurs, and For-Profit Firms in Crop Planting Decisions," Management Science, INFORMS, vol. 65(8), pages 3654-3672, August.
    18. Christin Schipmann & Matin Qaim, 2011. "Modern Food Retailers and Traditional Markets in Developing Countries: Comparing Quality, Prices, and Competition Strategies in Thailand," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(3), pages 345-362.
    19. Anderson, Edward & Monjardino, Marta, 2019. "Contract design in agriculture supply chains with random yield," European Journal of Operational Research, Elsevier, vol. 277(3), pages 1072-1082.
    20. Marcel Fafchamps & Ruth Vargas Hill, 2005. "Selling at the Farmgate or Traveling to Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 717-734.
    21. Tadesse, Getaw & Bahiigwa, Godfrey, 2015. "Mobile Phones and Farmers’ Marketing Decisions in Ethiopia," World Development, Elsevier, vol. 68(C), pages 296-307.
    22. Onumah, Gideon & Davis, Junior & Kleih, Ulrich & Proctor, Felicity, 2007. "Empowering Smallholder Farmers in Markets: Changing agricultural marketing systems and innovative responses by producer organizations," MPRA Paper 25984, University Library of Munich, Germany.
    23. Buhr, Brian L. & Kunkel, Phillip L., 1999. "A Guide To Swine Marketing Contracts," Staff Papers 13358, University of Minnesota, Department of Applied Economics.
    24. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(2), pages 179-221.
    25. Vamsi Vakulabharanam, 2005. "Growth and Distress in a South Indian Peasant Economy During the Era of Economic Liberalisation," Journal of Development Studies, Taylor & Francis Journals, vol. 41(6), pages 971-997.
    26. Ruth Beer & Hyun-Soo Ahn & Stephen Leider, 2018. "Can Trustworthiness in a Supply Chain Be Signaled?," Management Science, INFORMS, vol. 64(9), pages 3974-3994, September.
    27. Shivam Gupta & Milind Dawande & Ganesh Janakiraman & Ashutosh Sarkar, 2017. "Distressed Selling by Farmers: Model, Analysis, and Use in Policy-Making," Production and Operations Management, Production and Operations Management Society, vol. 26(10), pages 1803-1818, October.
    28. Christin Schipmann & Matin Qaim, 2011. "Modern Food Retailers and Traditional Markets in Developing Countries: Comparing Quality, Prices, and Competition Strategies in Thailand," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(3), pages 345-362.
    29. Rajiv D. Banker & Inder Khosla & Kingshuk K. Sinha, 1998. "Quality and Competition," Management Science, INFORMS, vol. 44(9), pages 1179-1192, September.
    30. Aparajita Goyal, 2010. "Information, Direct Access to Farmers, and Rural Market Performance in Central India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 22-45, July.
    31. Bhanot, Disha & Kathuria, Vinish & Das, Debabrata, 2021. "Can institutional innovations in agri-marketing channels alleviate distress selling? Evidence from India," World Development, Elsevier, vol. 137(C).
    32. Borodin, Valeria & Bourtembourg, Jean & Hnaien, Faicel & Labadie, Nacima, 2016. "Handling uncertainty in agricultural supply chain management: A state of the art," European Journal of Operational Research, Elsevier, vol. 254(2), pages 348-359.
    33. Marcel Fafchamps & Forhad Shilpi, 2003. "The spatial division of labour in Nepal," Journal of Development Studies, Taylor & Francis Journals, vol. 39(6), pages 23-66.
    34. Mussell, Al & Mayer, Holly & Martin, Larry J. & Grier, Kevin & Westgren, Randall E., 2003. "PRICE DISCOVERY MECHANISMS AND ALTERNATIVES FOR CANADIAN AGRICULTURE; Part I: A Review of Pricing Mechanisms in Agriculture," Miscellaneous Publications 18121, George Morris Center.
    35. Assa, Hirbod & Sharifi, Hossein & Lyons, Andrew, 2021. "An examination of the role of price insurance products in stimulating investment in agriculture supply chains for sustained productivity," European Journal of Operational Research, Elsevier, vol. 288(3), pages 918-934.
    36. Mussell, Al, 2003. "PRICE DISCOVERY MECHANISMS AND ALTERNATIVES FOR CANADIAN AGRICULTURE; Part II: A Review of Pricing Mechanisms from the Economic Literature," Miscellaneous Publications 18100, George Morris Center.
    37. Ishwari Singh Bisht & Jai Chand Rana & Sudhir Pal Ahlawat, 2020. "The Future of Smallholder Farming in India: Some Sustainability Considerations," Sustainability, MDPI, vol. 12(9), pages 1-25, May.
    38. Adusei Jumah, 2004. "The long run, market power and retail pricing," Empirical Economics, Springer, vol. 29(3), pages 605-620, September.
    39. Park Timothy & Lohr Luanne, 2006. "Choices of Marketing Outlets by Organic Producers: Accounting for Selectivity Effects," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 4(1), pages 1-26, July.
    40. Cervantes-Gaxiola, Maritza E. & Sosa-Niebla, Erik F. & Hernández-Calderón, Oscar M. & Ponce-Ortega, José M. & Ortiz-del-Castillo, Jesús R. & Rubio-Castro, Eusiel, 2020. "Optimal crop allocation including market trends and water availability," European Journal of Operational Research, Elsevier, vol. 285(2), pages 728-739.
    41. Forhad Shilpi & Dina Umali‐Deininger, 2008. "Market facilities and agricultural marketing: evidence from Tamil Nadu, India," Agricultural Economics, International Association of Agricultural Economists, vol. 39(3), pages 281-294, November.
    42. Joann F. de Zegher & Dan A. Iancu & Hau L. Lee, 2019. "Designing Contracts and Sourcing Channels to Create Shared Value," Manufacturing & Service Operations Management, INFORMS, vol. 21(2), pages 271-289, May.
    43. Giacomo Zanello & Chittur S. Srinivasan & Bhavani Shankar, 2014. "Transaction Costs, Information Technologies, and the Choice of Marketplace among Farmers in Northern Ghana," Journal of Development Studies, Taylor & Francis Journals, vol. 50(9), pages 1226-1239, September.
    44. Alfandari, Laurent & Plateau, Agnès & Schepler, Xavier, 2015. "A branch-and-price-and-cut approach for sustainable crop rotation planning," European Journal of Operational Research, Elsevier, vol. 241(3), pages 872-879.
    45. Harish Guda & Milind Dawande & Ganesh Janakiraman & Tharanga Rajapakshe, 2021. "An Economic Analysis of Agricultural Support Prices in Developing Economies," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 3036-3053, September.
    46. Jacoby, Hanan C, 2000. "Access to Markets and the Benefits of Rural Roads," Economic Journal, Royal Economic Society, vol. 110(465), pages 713-737, July.
    47. Sripad K. Devalkar & Ravi Anupindi & Amitabh Sinha, 2011. "Integrated Optimization of Procurement, Processing, and Trade of Commodities," Operations Research, INFORMS, vol. 59(6), pages 1369-1381, December.
    48. Xaba, Bongiwe G & Masuku, Micah B, 2013. "Factors Affecting the Choice of Marketing Channel by Vegetable Farmers in Swaziland," Sustainable Agriculture Research, Canadian Center of Science and Education, vol. 2(1).
    49. Srivastava, S.K. & Chand, Ramesh & Singh, Jaspal, 2017. "Changing Crop Production Cost in India: Input Prices, Substitution and Technological Effects," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 30(Conferenc).
    50. Qin Fan & Vania B. Salas Garcia, 2018. "Information Access and Smallholder Farmers’ Market Participation in Peru," Journal of Agricultural Economics, Wiley Blackwell, vol. 69(2), pages 476-494, June.
    51. Kenyon, David & Purcell, Wayne, 1999. "Price Discovery and Risk Management in an Industrialized Pork Sector," Staff Papers 232539, Virginia Polytechnic Institute and State University, Department of Agricultural and Applied Economics.
    52. Wendy J. Umberger & Thomas Reardon & Randy Stringer & Simone Mueller Loose, 2015. "Market-Channel Choices of Indonesian Potato Farmers: A Best-Worst Scaling Experiment," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 51(3), pages 461-477, December.
    53. Jaehyung An & Soo-Haeng Cho & Christopher S. Tang, 2015. "Aggregating Smallholder Farmers in Emerging Economies," Production and Operations Management, Production and Operations Management Society, vol. 24(9), pages 1414-1429, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xiaolong Guo & Lihong Cheng & Yugang Yu, 2022. "Government subsidy policy for green and efficient raw materials considering farmer heterogeneity," Production and Operations Management, Production and Operations Management Society, vol. 31(11), pages 4095-4112, November.
    2. Sushil Gupta & Hossein Rikhtehgar Berenji & Manish Shukla & Nagesh N. Murthy, 2023. "Opportunities in farming research from an operations management perspective," Production and Operations Management, Production and Operations Management Society, vol. 32(6), pages 1577-1596, June.
    3. Wei Zhang & Long Gao & Mohammad Zolghadr & Dawei Jian & Mohsen ElHafsi, 2023. "Dynamic incentives for sustainable contract farming," Production and Operations Management, Production and Operations Management Society, vol. 32(7), pages 2049-2067, July.
    4. Nuthalapati, Chandra S.R. & Sutradhar, Rajib & Reardon, Thomas & Qaim, Matin, 2020. "Supermarket procurement and farmgate prices in India," World Development, Elsevier, vol. 134(C).
    5. Aashish Argade & Laha, A. K., 2018. "Marketplace Options in an Emerging Economy Local Food Marketing System- Producers’ Choices, Choice Determinants and Requirements," IIMA Working Papers WP 2018-01-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    6. Nilanjan Dutta & Arshinder Kaur, 2023. "Enabling socially responsible operations: A decision-making model for a firm contracting with decision-biased smallholders," Annals of Operations Research, Springer, vol. 320(1), pages 509-533, January.
    7. Qian, Xiaoyan, 2021. "Production planning and equity investment decisions in agriculture with closed membership cooperatives," European Journal of Operational Research, Elsevier, vol. 294(2), pages 684-699.
    8. Zhong, Ling & Nie, Jiajia & Yue, Xiaohang & Jin, Minyue, 2023. "Optimal design of agricultural insurance subsidies under the risk of extreme weather," International Journal of Production Economics, Elsevier, vol. 263(C).
    9. Cao, Yu & Yi, Chaoqun & Wan, Guangyu & Hu, Hanli & Li, Qingsong & Wang, Shouyang, 2022. "An analysis on the role of blockchain-based platforms in agricultural supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 163(C).
    10. Chandra Sekhara Rao Nuthalapati & Yogesh Bhatt & Susanto K Beero, 2020. "Is the Electronic Market the Way Forward to Overcome Market Failures?," IEG Working Papers 387, Institute of Economic Growth.
    11. Nur Sunar & Jayashankar M. Swaminathan, 2022. "Socially relevant and inclusive operations management," Production and Operations Management, Production and Operations Management Society, vol. 31(12), pages 4379-4392, December.
    12. Hong, Xianpei & He, Yimeng & Zhou, Pin & Chen, Jiguang, 2023. "Demand information sharing in a contract farming supply chain," European Journal of Operational Research, Elsevier, vol. 309(2), pages 560-577.
    13. repec:lic:licosd:28811 is not listed on IDEAS
    14. A. Ganesh Kumar & Varun Kumar Das, 2020. "Do storage and structural factors determine agricultural commercialization in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-004, Indira Gandhi Institute of Development Research, Mumbai, India.
    15. Marcel Fafchamps & Ruth Vargas Hill & Bart Minten, 2008. "Quality control in nonstaple food markets: evidence from India," Agricultural Economics, International Association of Agricultural Economists, vol. 38(3), pages 251-266, May.
    16. Liu, Hengyu & Zheng, Kai, 2024. "Analysis of the Chinese government's subsidy programs to restore the pork supply chain: The case of African swine fever," Omega, Elsevier, vol. 124(C).
    17. Lingxiu Dong, 2021. "Toward Resilient Agriculture Value Chains: Challenges and Opportunities," Production and Operations Management, Production and Operations Management Society, vol. 30(3), pages 666-675, March.
    18. Zant, Wouter, 2024. "Mobile phones and Mozambique farmers: Less asymmetric information and more trader competition?," World Development, Elsevier, vol. 180(C).
    19. Gómez, Miguel I. & Ricketts, Katie D., 2013. "Food value chain transformations in developing countries: Selected hypotheses on nutritional implications," Food Policy, Elsevier, vol. 42(C), pages 139-150.
    20. Jiguang Chen & Ying‐Ju Chen, 2021. "The Impact of Contract Farming on Agricultural Product Supply in Developing Economies," Production and Operations Management, Production and Operations Management Society, vol. 30(8), pages 2395-2419, August.
    21. Dan, Bin & Lei, Ting & Zhang, Xumei & Liu, Molin & Ma, Songxuan, 2023. "Modeling of the subsidy policy in fresh produce wholesale markets under yield uncertainty," Economic Modelling, Elsevier, vol. 126(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:311:y:2023:i:2:p:739-753. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.