Effect of e-commerce on the competitive structure of the coffee market: Evidence from India

Abstract

This study examines how the use of digital platforms affects the demand for premium coffee. We make use of a framework for monopolistic competition with horizontally differentiated varieties of coffee, with an adjacent segment for high quality coffee. Using data of the demand for premium coffee in India, we confirm that the introduction of digital platforms in the coffee market increases demand elasticity and intensifies competition. The results can be reconcile with a setting in which firms compete aggressively, when consumer have a higher valuation for direct sourcing and face low transaction cost of acquiring from the local distributor. Generally, it suggests that demand reactions will become more elastic, always that the transaction cost from sourcing directly from origin reduces significantly with the introduction of the digital platforms. This study fills a knowledge gap regarding the effects of digital platforms on the dynamics of the competitive setting in the coffee markets. And provide insights for producers, traders, policymakers, and researchers to make wise decisions. To adjust to the changing market environment, they must understand these dynamics.

Este estudio examina cómo el uso de plataformas digitales afecta la demanda de café premium. Utilizamos un marco de competencia monopolística con variedades de café diferenciadas horizontalmente, con un segmento adyacente para café de alta calidad. Utilizando datos de la demanda de café premium en la India, confirmamos que la introducción de plataformas digitales en el mercado del café aumenta la elasticidad de la demanda e intensifica la competencia. Los resultados pueden conciliarse con un escenario en el que las empresas compiten de manera agresiva, cuando los consumidores valoran más la obtención directa y enfrentan bajos costos de transacción al adquirir del distribuidor local. En general, sugiere que las reacciones de la demanda se volverán más elásticas, siempre que el costo de transacción para obtener directamente desde el origen disminuya significativamente con la introducción de las plataformas digitales.