Here’s a feel-good financial innovation: what if customers could use a mobile app to tip the farmer who produced their food? A new wave of apps, enabled by blockchain, the same technology that enables the cryptocurrency bitcoin, would give socially conscious consumers the chance to boost the wages of smallholder farmers in low-income countries.

But this seemingly positive development might have unintended consequences, according to a new study co-authored by Yale SOM professor Saed Alizamir. The team developed a game-theoretic model to explore how tipping might influence other forces at play among farmers, intermediary agricultural firms, and consumers. The model suggested that, in some situations, tipping could make farmers worse off—for instance, if this feature prompts the agricultural firm to substantially lower the wholesale price for harvests. And even if it achieves its objective of increasing the farmers’ expected wage as intended, not all farmers will benefit equally, which may lead to a perception of unfairness among farmers.

“Does this tipping capability always achieve the intended objective?” Alizamir says. “The answer is no, not necessarily.”

The team did identify a scenario where everyone—farmers, consumers, and intermediaries—benefited from tipping. But achieving this “win-win-win” outcome depends on a complicated set of factors, ranging from how much customers care about fair wages for farmers to how costly it is for the farmers to switch from traditional to sustainable farming.

Given the complexity of the situation, companies should proceed with caution before implementing a tipping option, the team argues. “There might be situations where one or even all of the stakeholders may turn out to be worse off,” Alizamir says.

(Excerpt) Read more Here | 2021-08-09 10:19:45
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