Using ICT to Reduce Transaction Costs in Agriculture through Better Communication: A case study from Sri Lanka

[Knowledge base]

The possibility to use ICTs for better information and a reduction of the transaction cost was studied by de Silva and Ratnadiwakara (2008) on small-holder farmers in Sri Lanka. They show that 11% of the total cost is informational search costs (NB: this case is within the scenario of a government promotion of fertilizers, which is believed to increase search activity). Broken down, information search costs account for 25% of the total growing costs, 20% of the selling costs, and 75% of the costs to decide on appropriate crops. The other factor ratios are less significant but still important related to the amount of money spent. This proves that ITCs can play an important role. In this particular case, by using a mobile phone instead of travelling to reach information, the information search cost decreased by 33%. Moreover the travel time can be use for doing something else.

For more information see: de Silva and Ratnadiwakara (2008), Using ICT to Reduce Transaction Costs in Agriculture through Better Communication: A case study from Sri Lanka, LIRNEasia.

Paper available here: http://www.lirneasia.net/wp-content/uploads/2008/11/transactioncosts.pdf