Electronic commerce for agricultural transactions: role of intermediaries and accurate pricing

Abstract

This paper addresses the functional structure of agricultural electronic marketplaces, together with associated pricing mechanisms. The analysis of transaction costs suggests that electronic commerce with intermediaries provides more efficient trading environments than electronic marketplace without intermediaries. This indicates that existing intermediary institutions will remain important for agricultural transactions even after the adoption of electronic market systems. Compared to other industries or markets, agricultural markets are characterised as competitive markets and pricing is a key factor for efficient resource allocations. Pricing mechanisms being used by agricultural markets are contrasted with those of the Internet-based retail electronic commerce. This paper suggests that the current pricing in the Internet-based commerce is not efficient for agricultural electronic marketplaces, and that development of an alternative pricing mechanism is required to ensure efficient and accurate pricing for agricultural electronic commerce.