Can Farmers Earn from Selling Their Data? A Theoretical Framework

Abstract

Access to farm data via market may facilitate more productive contracting, as the benefits from alternative contracts might be estimated more comprehensively and precisely. Using computer simulations on a stylized model, this study reveals a conflict between public and private interest in establishing such market. The model describes contracting under the uncertainty about benefits and the limited agent's capacity to maintain contracts. It works in two modes: ordinary (the benefit from only one contract can be estimated each time step) and digital (the benefits from all available contracts are estimated simultaneously and the preciseness is better). The incremental cash flow from changing the ordinary mode for digital, both in private and public dimensions, is in the focus of the study. Because of the uncertain and incomplete (in the ordinary mode) estimates, the acceptance or rejection of digitalization depends on risk aversion. In a mature economy, the consensus about digitalization is not possible unless the public gain is redistributed. In an emerging economy, such consensus is possible if risk lovers are present among the agents and all lotteries with the nonpositive mean are theirs. So, the society can earn from the data market but, in the general case, farmers may lose.