IDEAS home Printed from https://ideas.repec.org/p/jet/dpaper/dpaper505.html
   My bibliography  Save this paper

Understanding traders' regional arbitage : the case of rice traders in Antananarivo, Madagascar

Author

Listed:
  • Arimoto, Yutaka
  • Kono, Hisaki
  • Ralandison, Tsilavo
  • Sakurai, Takeshi
  • Takahashi, Kazushi

Abstract

Many studies find that agricultural markets in developing countries are poorly integrated spatially. Traders' regional arbitrage plays a key role in integrating markets across space. We investigate the performance of regional arbitrage and the associated obstacles for rice traders in Antananarivo, Madagascar. On the basis of a trader-level biweekly survey spanning 2012–2013, we find that traders are not fully exploiting the regional arbitrage opportunities: most of them fail to purchase from the cheapest district and are paying higher prices than those in the cheapest district. One apparent obstacle is obtaining price information from many different regions. To reduce search costs, we provided regional price information via SMS to randomly selected traders, but found that this had a null-effect on improving arbitrage performance. Traders tend to concentrate on trading with a few fixed districts, even if they are informed about cheaper prices in other new districts, because they worry about quality uncertainty and the trustworthiness of new partners. These findings suggest that not only transmission of price information but also issues related to produce quality and matching prevent the performance of arbitrage and market integration.

Suggested Citation

  • Arimoto, Yutaka & Kono, Hisaki & Ralandison, Tsilavo & Sakurai, Takeshi & Takahashi, Kazushi, 2015. "Understanding traders' regional arbitage : the case of rice traders in Antananarivo, Madagascar," IDE Discussion Papers 505, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper505
    as

    Download full text from publisher

    File URL: https://ir.ide.go.jp/?action=repository_action_common_download&item_id=37672&item_no=1&attribute_id=22&file_no=1
    File Function: First version, 2015
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nakasone, Eduardo, 2013. "The Role of Price Information in Agricultural Markets: Experimental Evidence from Rural Peru," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150418, Agricultural and Applied Economics Association.
    2. Jenny C. Aker & Marcel Fafchamps, 2015. "Mobile Phone Coverage and Producer Markets: Evidence from West Africa," The World Bank Economic Review, World Bank, vol. 29(2), pages 262-292.
    3. Robert T. Jensen, 2010. "Information, efficiency, and welfare in agricultural markets," Agricultural Economics, International Association of Agricultural Economists, vol. 41(s1), pages 203-216, November.
    4. Miyake, Hajime & Sakurai, Takeshi, 2012. "Improvement of Transportation Infrastructure and Integration of Agricultural Market-An Analysis of Rice Market in Madagascar-," Economic Review, Hitotsubashi University, vol. 63(3), pages 209-226, July.
    5. Jenny C. Aker & Isaac M. Mbiti, 2010. "Mobile Phones and Economic Development in Africa," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 207-232, Summer.
    6. Richard J. Sexton & Catherine L. Kling & Hoy F. Carman, 1991. "Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 568-580.
    7. 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.
    8. Jenny C. Aker, 2010. "Information from Markets Near and Far: Mobile Phones and Agricultural Markets in Niger," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 46-59, July.
    9. Robert Jensen, 2007. "The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries Sector," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(3), pages 879-924.
    10. Adriana Camacho & Emily Conover & econover@hamilton.edu, 2010. "The Impact of Receiving Price and Climate Information in the Agricultural Sector," Documentos CEDE 7907, Universidad de los Andes, Facultad de Economía, CEDE.
    11. Jakob Svensson & David Yanagizawa, 2009. "Getting Prices Right: The Impact of the Market Information Service in Uganda," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 435-445, 04-05.
    12. Krähmer, Daniel & Strausz, Roland, 2015. "Ex post information rents in sequential screening," Games and Economic Behavior, Elsevier, vol. 90(C), pages 257-273.
    13. Treb Allen, 2014. "Information Frictions in Trade," Econometrica, Econometric Society, vol. 82, pages 2041-2083, November.
    14. Marcel Fafchamps & Bart Minten, 2012. "Impact of SMS-Based Agricultural Information on Indian Farmers," The World Bank Economic Review, World Bank, vol. 26(3), pages 383-414.
    15. Adriana Camacho & Emily Conover & econover@hamilton.edu, 2010. "The Impact of Receiving Price and Climate Information in the Agricultural Sector," DOCUMENTOS CEDE 007907, UNIVERSIDAD DE LOS ANDES-CEDE.
    16. Marcel Fafchamps, 2002. "Returns to social network capital among traders," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 173-206, April.
    17. J. S. Butler & Christine Moser, 2010. "Structural Model of Agricultural Markets in Developing Countries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(5), pages 1364-1378.
    18. Fackler, Paul L. & Goodwin, Barry K., 2001. "Spatial price analysis," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 17, pages 971-1024, Elsevier.
    19. 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.
    20. ., 2014. "Information is not free," Chapters, in: Reframing Economics, chapter 6, pages 101-121, Edward Elgar Publishing.
    21. Eduardo Nakasone & Maximo Torero & Bart Minten, 2014. "The Power of Information: The ICT Revolution in Agricultural Development," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 533-550, October.
    22. Jesse Tack & Jenny C. Aker, 2014. "Information, Mobile Telephony, and Traders' Search Behavior in Niger," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1439-1454.
    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. Eduardo Nakasone & Maximo Torero, 2016. "A text message away: ICTs as a tool to improve food security," Agricultural Economics, International Association of Agricultural Economists, vol. 47(S1), pages 49-59, November.
    2. Zant, Wouter, 2024. "Mobile phones and Mozambique farmers: Less asymmetric information and more trader competition?," World Development, Elsevier, vol. 180(C).
    3. Abate, Gashaw T. & Abay, Kibrom A. & Chamberlin, Jordan & Kassim, Yumna & Spielman, David J. & Paul Jr Tabe-Ojong, Martin, 2023. "Digital tools and agricultural market transformation in Africa: Why are they not at scale yet, and what will it take to get there?," Food Policy, Elsevier, vol. 116(C).
    4. Aker, Jenny C. & Ksoll, Christopher, 2016. "Can mobile phones improve agricultural outcomes? Evidence from a randomized experiment in Niger," Food Policy, Elsevier, vol. 60(C), pages 44-51.
    5. Soldani, Emilia & Hildebrandt, Nicole & Nyarko, Yaw & Romagnoli, Giorgia, 2023. "Price information, inter-village networks, and “bargaining spillovers”: Experimental evidence from Ghana," Journal of Development Economics, Elsevier, vol. 164(C).
    6. Chris Parker & Kamalini Ramdas & Nicos Savva, 2016. "Is IT Enough? Evidence from a Natural Experiment in India’s Agriculture Markets," Management Science, INFORMS, vol. 62(9), pages 2481-2503, September.
    7. Dagim G. Belay & Hailemariam Ayalew, 2020. "Nudging farmers in crop choice using price information: Evidence from Ethiopian Commodity Exchange," Agricultural Economics, International Association of Agricultural Economists, vol. 51(5), pages 793-808, September.
    8. Uwe Deichmann & Aparajita Goyal & Deepak Mishra, 2016. "Will digital technologies transform agriculture in developing countries?," Agricultural Economics, International Association of Agricultural Economists, vol. 47(S1), pages 21-33, November.
    9. Jenny Aker & Joel Cariolle, 2022. "The Use of Digital for Public Service Provision in Sub-Saharan Africa," Post-Print hal-03003899, HAL.
    10. Jenny C. Aker & Marcel Fafchamps, 2015. "Mobile Phone Coverage and Producer Markets: Evidence from West Africa," The World Bank Economic Review, World Bank, vol. 29(2), pages 262-292.
    11. Munsaka, Eustensia, 2018. "The use of information sharing systems to address opportunistic behaviour between tomato farmers and brokers in Zambia," Research Theses 334750, Collaborative Masters Program in Agricultural and Applied Economics.
    12. Kamiche Zegarra, J. & Bravo-Ureta, B., 2018. "Are users of market information efficient? A stochastic production frontier model corrected by sample selection," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 275870, International Association of Agricultural Economists.
    13. Riera, O. & Minten, B., 2018. "Mobile phones and agricultural market performance in Ethiopia," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277107, International Association of Agricultural Economists.
    14. Yaw Nyarko, 2017. "Transforming Rural Africa-Economics, Technology and Governance," Journal of African Development, African Finance and Economic Association (AFEA), vol. 19(1), pages 161-167.
    15. Staatz, John M. & Kizito, Andrew M. & Weber, Michael T. & Dembele, Niama Nango, 2011. "Evaluating the Impact on Market Performance of Investments in Market Information Systems: Methodological Challenges," Staff Paper Series 108184, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    16. David-Benz, Hélène & Andriandralambo, Norontsoa & Soanjara, Helgina & Chimirri, Chiara & Rahelizatovo, Noro & Rivolala, Bezaka, 2016. "Improving access to market information: a driver of change in marketing strategies for small producers?," 149th Seminar, October 27-28, 2016, Rennes, France 245073, European Association of Agricultural Economists.
    17. Negi, Digvijay S. & Birthal, Pratap S. & Roy, Devesh & Khan, Md. Tajuddin, 2018. "Farmers’ choice of market channels and producer prices in India: Role of transportation and communication networks," Food Policy, Elsevier, vol. 81(C), pages 106-121.
    18. Camacho, Adriana & Conover, Emily, 2019. "The impact of receiving SMS price and weather information on small scale farmers in Colombia," World Development, Elsevier, vol. 123(C), pages 1-1.
    19. Shimamoto, Daichi & Yamada, Hiroyuki & Gummert, Martin, 2015. "Mobile phones and market information: Evidence from rural Cambodia," Food Policy, Elsevier, vol. 57(C), pages 135-141.
    20. Pallavi Rajkhowa & Lukas Kornher, 2023. "Effects of electronic markets on prices, spikes in prices, and price dispersion: A case study of the tea market in India," Agribusiness, John Wiley & Sons, Ltd., vol. 39(4), pages 1117-1138, October.

    More about this item

    Keywords

    Madagascar; Rice; Market; Retail trade; Primary commodities; Regional arbitrage; Market integration; Information friction; Price information; Search;
    All these keywords.

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:jet:dpaper:dpaper505. 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: Michitaka Imamitsu (email available below). General contact details of provider: https://edirc.repec.org/data/idegvjp.html .

    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.