The importance of bridging information gap.
Agriculture is an economic activity in which information plays a very important role as critical information asymmetry exists in transactions between various stakeholders – farmers, traders, government, policy makers and consumers.
Large traders collect the information for themselves from different markets. This is an expensive operation and also leads to increased transaction costs. Due to the concentration of information with the traders, they are in a better bargaining position over the farmers. Thus spatial arbitrage depends upon current information and traders spend a lot of money in gathering this information. But this is not the case with small traders who lack resources to set up their own information networks. This prevents the entry of a number of small traders to the markets. Traders also involve in temporal arbitrage, which entails storing produce for long periods until suitable price can be obtained. But storage costs (maintenance chemicals costs, capital and its depreciation costs) are also quite considerable. So, traders are dependent on information from the past to assess the viability of storage and its associated risks. This results in less than optimum decision making by the farmers.