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Sustaining Rainforests and Smallholders by Eliminating Payment Delay in a Commodity Supply Chain--It Takes a Village

Author

Listed:
  • de Zegher, Joann F.

    (Stanford University)

  • Iancu, Dan A.

    (Stanford University)

  • Plambeck, Erica

    (Stanford University)

Abstract

Millions of poor smallholder farmers produce global commodities, often through illegal deforestation. Multinational commodity buyers have committed to halt illegal deforestation and improve farmers' livelihoods in their supply chains. We propose a profitable way to do so, motivated by field research in Indonesia's palm oil industry. Currently, farmers suffer from delay in payment by processors, and buyers expensively attempt to avoid sourcing from illegally-deforested land by monitoring individual farmers. Instead, we propose that buyers reward all farmers in a village by eliminating payment delay if no production occurs on illegally-deforested land in the village. Using field data, dynamic programming and game theory, we show how eliminating payment delay improves productivity and profitability for farmers, processors and buyers, and how village-level incentives best halt illegal deforestation.

Suggested Citation

  • de Zegher, Joann F. & Iancu, Dan A. & Plambeck, Erica, 2018. "Sustaining Rainforests and Smallholders by Eliminating Payment Delay in a Commodity Supply Chain--It Takes a Village," Research Papers 3684, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3684
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    Cited by:

    1. Matthew J. Sobel, 2022. "Value Games," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 15(3), pages 307-324, July.
    2. Fasheng Xu & Xiaomeng Guo & Guang Xiao & Fuqiang Zhang, 2022. "Crowdfunding Adoption in the Presence of Word-of-Mouth Communication," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 15(3), pages 247-265, July.
    3. 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.
    4. Zhi Chen & Jussi Keppo, 2022. "Data Sharing in Innovations," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 15(3), pages 266-281, July.
    5. Karen Donohue & Özalp Özer, 2020. "Behavioral Operations: Past, Present, and Future," Manufacturing & Service Operations Management, INFORMS, vol. 22(1), pages 191-202, January.
    6. Erica L. Plambeck & Kamalini Ramdas, 2020. "Alleviating Poverty by Empowering Women Through Business Model Innovation: Manufacturing & Service Operations Management Insights and Opportunities," Manufacturing & Service Operations Management, INFORMS, vol. 22(1), pages 123-134, January.
    7. Hamed Ghoddusi, 2022. "Coordination Problems in Platform Markets Under Uncertainty," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 15(3), pages 282-306, July.
    8. Nicola Secomandi, 2022. "Quadratic Hedging and Optimization of Option Exercise Policies," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 15(3), pages 204-224, July.
    9. Paolo Guiotto & Andrea Roncoroni & Roméo Tédongap, 2022. "Operations Revenue Insurance," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 15(3), pages 225-246, July.

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