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Asymmetric information and blockchains in soybean commodity markets

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  • Prithviraj Lakkakula
  • David W. Bullock
  • William W. Wilson

Abstract

Asymmetric information is prevalent in the grain and oilseed markets. This paper demonstrates the benefits of blockchain technology to mitigate asymmetric information about the soybean's protein quality between sellers and buyers. We use decision trees to model information asymmetry under both conventional and blockchain scenarios. The results suggest that asymmetric information can be mitigated with a blockchain, resulting in substantial premiums (40–60 cents per bushel of soybeans). These results could have significant implications for the grain and oilseed industry in order to decrease transaction costs, to improve market efficiency, and to prioritize strategies for the procurement of soybeans. JEL CLASSIFICATION O33 Q13; Q17

Suggested Citation

  • Prithviraj Lakkakula & David W. Bullock & William W. Wilson, 2022. "Asymmetric information and blockchains in soybean commodity markets," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(1), pages 273-298, March.
    • Handle: RePEc:wly:apecpp:v:44:y:2022:i:1:p:273-298
    DOI: 10.1002/aepp.13159
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    References listed on IDEAS

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    1. Wilson, William W. & Dahl, Bruce L., 2009. "Grain Contracting Strategies to Induce Delivery and Performance in Volatile Markets," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 41(2), August.
    2. Michael Sykuta & Joseph Parcell, 2003. "Contract Structure and Design in Identity-Preserved Soybean Production," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(2), pages 332-350.
    3. Wilson, William W. & Dahl, Bruce L., 2008. "Procurement Strategies to Improve Quality Consistency in Wheat Shipments," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(1), pages 1-17, April.
    4. D. Demcey Johnson & William W. Wilson & Matthew A. Diersen, 2001. "Quality Uncertainty, Procurement Strategies, and Grain Merchandising Risk: Vomitoxin in Spring Wheat," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 23(1), pages 102-119.
    5. Prithviraj Lakkakula & David Bullock & William Wilson, 2020. "Blockchain Technology in International Commodity Trading," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 35(Summer 20), pages 23-46.
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    Cited by:

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    2. Meiling Li & Lijie Zhang & Zhuangzhuang Zhang, 2023. "Impact of Digital Economy on Inter-Regional Trade: An Empirical Analysis in China," Sustainability, MDPI, vol. 15(15), pages 1-22, August.
    3. Xiangzhen Peng & Xin Zhang & Xiaoyi Wang & Haisheng Li & Jiping Xu & Zhiyao Zhao, 2022. "Multi-Chain Collaboration-Based Information Management and Control for the Rice Supply Chain," Agriculture, MDPI, vol. 12(5), pages 1-26, May.

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    More about this item

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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