Analyzing Traditional and Online Markets for Tractors? Evidence from eBay and Farmers and Consumers Markets Bulletin

Summary

More and more farmers are using online markets to purchase farm machinery. This research explores the determinants of price for tractor auctions on eBay and tractors that are listed on more traditional markets like the Farmers and Consumers Market Bulletin (FCMB) in Georgia and compares the outcomes of each market.

Situation

The birth of internet has spurred an unprecedented growth on online business sales during the last decade. However, despite its obvious advantages, a big disadvantage is that buyers cannot physically inspect the items before purchase. While auctions sites can facilitate sales of agricultural machineries with greater ease and over greater distances, they could also present heightened informational burdens, making them a less efficient medium of exchange. Clearly, online markets differ from more traditional local markets which rely mainly on postings on local newspapers, magazines and market bulletins provided by the agricultural state departments. The Farmers and Consumers Market Bulletin (FCMB) in Georgia for example has been around for 89 years and has provided a medium of exchange between local buyers and sellers for a wide variety of agricultural inputs and outputs.

Response

We use several regression models and matching estimators to examine three aspects of tractor listings on eBay and FCMB. First we examine the main determinants of prices for tractors offered on eBay taking into consideration seller reputation and whether the seller is a professional dealer or an individual. Second we investigate the factors that affect the probability of sale on eBay and FCMB. Finally we investigate whether prices received on eBay are comparable to those on Georgia's FCMB.

Impact

Results suggest that seller feedback rating does not influence price while engine hours and the presence of air conditioning are negatively and positively related to price, respectively. Individuals that list tractors on eBay receive higher prices on average than dealers. In addition tractor auctions that result in a sale on eBay on average do not exhibit prices different from those tractors that sold on FCMB. Traditional markets such as FCMB in Georgia are still widely used. However, one on one matching suggests that in several cases there may be opportunities for farmers who list on FCMB to get prices that are equal to or even higher than their lowest acceptable price if they list their tractors on eBay. According to USDA only 8 percent of the farmers in Georgia that have internet access use it to conduct agricultural market activities (USDA-NASS, 2009). Online auctions appear to be favorable for those farmers that seek to sell farm machinery.

State Issue

Agribusiness Development/Value Added

Details

• Year: 2010
• Geographic Scope: National
• County: Spalding
• Program Areas:
  • Agriculture & Natural Resources