Farm Equipment Sharing in Emerging Economies

Department of Decision Sciences and Managerial Economics

In emerging economies, there is a growing number of farm equipment sharing platforms that connect smallholder farmers with tractor owners who are willing to fulfil farmers’ requests for mechanisation services. Due to the small farm sizes and the low digital literacy in rural areas of emerging economies, these platforms often rely on the so-called “booking agents” to collect demand from individual farmers and submit the aggregated demand on the platform (rather than having individual farmers submit their service requests). This paper studies how the presence of such booking agents affects the platform’s optimal pricing and wage decisions and equilibrium outcomes. Our analysis reveals several insights. First, we show that the platform should consider paying out a higher percentage of the price to booking agents when the number of tractors on the platform increases, when tractor owners’ operating cost decreases, and surprisingly, when the platform puts more emphasis on its profit (over farmer surplus). Second, in contrast to conventional sharing settings, we show that in the presence of booking agents, an increase in the number of service providers (i.e., tractors) may lead to a lower optimal platform commission. Finally, while efforts to enhance the supply side of the platform (e.g., increasing the number of tractors or reducing tractor owners’ operating cost) generally lead to a decrease in price and an increase in total farmer surplus, we find that reducing booking agents’ demand aggregation cost can lead to an increase in price and a decrease in total farmer surplus.