Two papers came to my notice which explore the link between spread or use of communications technology and efficiency of markets. One is recent and the other is a bit older. Following are the abstracts of the papers with links:
When information is limited or costly, agents are unable to engage in optimal arbitrage. Excess price dispersion across markets can arise, and goods may not be allocated efficiently. In this setting, information technologies may improve market performance and increase welfare. Between 1997 and 2001, mobile phone service was introduced throughout Kerala, a state in India with a large fishing industry. Using microlevel survey data, we show that the adoption of mobile phones by fishermen and wholesalers was associated with a dramatic reduction in price dispersion, the complete elimination of waste, and near-perfect adherence to the Law of One Price. Both consumer and producer welfare increased.
“Information, Direct Access to Farmers, and Rural Market Performance in Central India”, by Aparajita Goyal. American Economic Journal: Applied Economics, forthcoming.
This paper estimates the impact of a change in procurement strategy of a private buyer in the central Indian state of Madhya Pradesh. Beginning in October 2000, internet kiosks and warehouses were established that provide wholesale price information and an alternative marketing channel to soy farmers in the state. Using a new market-level dataset, the estimates suggest a signicant increase in soy price after the introduction of kiosks, supporting the predictions of the theoretical model. Moreover, there is a robust increase in area under soy cultivation. The results point towards an improvement in the functioning of rural agricultural markets.