Asymmetric information and blockchains in soybean commodity markets

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

Consumer valuation of blockchain traceability for beef in the United States

“…BCs may provide internal, business‐to‐business (B2B), and business‐to‐consumer (B2C) efficiencies that save both time and money. BC could benefit a number of agricultural and food applications, including farm data tracking and digital agriculture (Griffin et al, 2021), international trade and policy (Guerra & Boys, 2022; Lakkakula et al, 2021), fresh produce supply chains (Collart & Canales, 2021), and demand for international traceability with country‐of‐origin information (Lin et al, 2022). Additionally, companies may extract price premiums in cases where consumers value product information and certification.…”

Nongrade quality factor influence on origin soybean basis: Evidence from North Dakota

“…Finally, given the growth of blockchain and its potential applications to agriculture it may be possible to mitigate some buyer risks through use of that technology. Lakkakula et al (2022) analyzed the benefit of using blockchain smart contracts to mitigate asymmetric information between a PNW buyer and a North Dakota origin seller regarding the protein content of a soybean shipment for export. A decision tree model that captured the effects of asymmetry of information between the buyer and seller was developed.…”

Research Progress of Information Asymmetry in Recent Ten Years

“…Lakkakula et al use the unique characteristics of blockchain Technology (hereinafter referred to as blockchain) to prove that it can reduce the information asymmetry between sellers / buyers / importers in the morsel and oil trade [10]. Blockchain is a handed out ledger that employs encryption and invariance features between different participants in the blockchain network (seller/buyer/importer, etc.)…”

“…Blockchain is a handed out ledger that employs encryption and invariance features between different participants in the blockchain network (seller/buyer/importer, etc.) to stop retroactive change of record best [10]. The unique characteristics of blockchain -distributed database, invariance and secure transaction -enable the protein quality of soybeans to be known simultaneously by all (complete) participants in the network, thus reducing information asymmetry.…”