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

This paper considers the specific role of information and communication technologies [ICT] in reducing transaction costs in agriculture by enabling timely and affordable communication. Segmenting transaction costs in to several components, the paper isolates the costs associated with information search as the specific costs that could be influenced through ICT. Analyzing the findings of a case study among a group of smallholder vegetable farmers in Sri Lanka the paper identifies the specific information needs of these farmers along the agriculture value chain starting with the decision on the crop to be planted and ending with the sale of produce at the wholesale market and measures the information search costs associated with this group of farmers. The paper concludes by indicating the possibility of dramatic reductions of transaction costs with the use of ICT to reduce information search costs to enable greater farmer participation in commercial agriculture as opposed to subsistence farming that continue to force so many farmers in developing countries in to poverty.