Electronic marketplaces under conditions of oligopsony and relational marketing – an empirical exploration of electronic agricultural markets in India

Abstract

Benefits of electronic marketplaces across diverse, largely consumer-facing, competitive industries have been in the form of lower transaction costs, transparent price discovery, and improved coordination. This article explores the benefits of electronic marketplaces under oligopsony, which generally encompasses relational marketing as well. With producer – first handler agricultural markets as the context, the article draws from literature on electronic marketplaces, transaction costs, and seller-buyer dependence. Based on survey data, an exploratory factor analysis is conducted to understand the elements of relational marketing between farmers and traders. Subsequently, transaction costs of marketing in a physical agricultural marketplace are compared with those in its electronic counterpart. Results did not indicate significant reduction in transaction costs in the e-marketplaces. Reasons for such findings are logically deduced to be a consequence of opportunistic traders not sharing marketing-related information with farmers, notwithstanding dependence of the latter on traders for such informational needs. Implications for policymakers, third-party electronic marketplace providers are discussed for the specific context, besides indicators for similar other market structures.