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Comparing commodity prices in electronic and traditional auctions: empirical evidence from Indian coffee auctions

Published: 15 August 2005 Publication History

Abstract

We analyze transaction data from a recently set up electronic exchange in India that trades in various grades of coffee. Such electronic exchanges have important implications for the supply chain of agricultural commodities and have generated significant interest in the trade press because of their potential to generate higher commodity prices for producers and reduced chances of unfair trading practices by middlemen. Policy makers view such exchanges as an important tool for extending the benefits of the information age to rural communities. We model the exchange from the perspective of a risk-averse buyer and we estimate the parameters of the model by comparing the prices in the electronic exchange with those of the same grade of coffee at physical auctions held weekly. We find that electronic auction prices are 4% higher and the difference is statistically significant. Further, we find that the price differential is higher for coffee grades that have higher price volatility and that are traded less frequently in the physical exchange. We also find that the price differential increases over time as buyers become more familiar with the benefits of the electronic trading format. We discuss the implications of our results for policy makers and providers of the electronic platform.

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  • (2022)Impact of the US Dollar Index and Crude Oil on Prices of Arabica and Robusta Varieties of Indian CoffeeBusiness Perspectives and Research10.1177/22785337221077399(227853372210773)Online publication date: 16-Feb-2022

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  1. Comparing commodity prices in electronic and traditional auctions: empirical evidence from Indian coffee auctions

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      cover image ACM Other conferences
      ICEC '05: Proceedings of the 7th international conference on Electronic commerce
      August 2005
      957 pages
      ISBN:1595931120
      DOI:10.1145/1089551
      • Conference Chairs:
      • Qi Li,
      • Ting-Peng Liang
      Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for components of this work owned by others than ACM must be honored. Abstracting with credit is permitted. To copy otherwise, or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. Request permissions from [email protected]

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      Association for Computing Machinery

      New York, NY, United States

      Publication History

      Published: 15 August 2005

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      Author Tags

      1. commodity auctions
      2. online auctions
      3. price comparison

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      • (2022)Impact of the US Dollar Index and Crude Oil on Prices of Arabica and Robusta Varieties of Indian CoffeeBusiness Perspectives and Research10.1177/22785337221077399(227853372210773)Online publication date: 16-Feb-2022

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