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Efficient and Confidential Reallocation of Contracts: How The Danish Sugar Industry Adapted to The New Sugar Regime

Author

Listed:
  • Peter Bogetoft

    (Department of Economics, Copenhagen Business School CBS)

  • Kurt Nielsen

    (Department of Food and Resource Economics, University of Copenhagen)

Abstract

The first Danish exchange for sugar beet contracts was established in January 2008. It was also the world’s first major application of a particular new technology, secure multiparty computation (SMC), which ensures the security and cost-effectiveness of such exchanges. The technology can also be used in a number of other applications, including voting, negotiations, and benchmarking. The SMC approach makes it possible to combine private knowledge from a large number of players without ever revealing their individual knowledge. This provides unique opportunities for individual players to act together despite conflicting interests and decentralized knowledge, which, in many contexts, constitute the primary obstacle to the creation of economic gains. This exchange was the culmination of a novel and successful collaboration between economists and cryptologists, and it constitutes a successful operations research project using novel scientific methods to solve a real, large-scale problem. This article describes the background for and the implementation of the exchange and discusses some other potential applications.

Suggested Citation

  • Peter Bogetoft & Kurt Nielsen, 2010. "Efficient and Confidential Reallocation of Contracts: How The Danish Sugar Industry Adapted to The New Sugar Regime," MSAP Working Paper Series 07_2010, University of Copenhagen, Department of Food and Resource Economics.
    • Handle: RePEc:foi:msapwp:07_2010
    as

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    File URL: http://okonomi.foi.dk/workingpapers/MSAPpdf/MSAP2010/MSAP_WP07_2010.pdf
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    References listed on IDEAS

    as
    1. Peter Bogetoft & Henrik Ballebye Olesen, 2002. "Ten rules of thumb in contract design: lessons from Danish agriculture," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 29(2), pages 185-204, June.
    2. Peter Bogetoft & Kristoffer Boye & Henrik Neergaard-Petersen & Kurt Nielsen, 2007. "Reallocating sugar beet contracts: can sugar production survive in Denmark?," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 34(1), pages 1-20, March.
    3. Peter Bogetoft & Kurt Nielsen & Henrik Ballebye Olesen, 2003. "The single-bid restriction on milk quota exchanges," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 30(2), pages 193-215, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    double auction; secure multiparty computation; sugar beets; data envelopment analysis (DEA);
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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