Market power in smart farming and the distribution of gains in two-stage crop production system

Abstract

In smart farming, agricultural technology providers (ATPs) wield market power in both the upstream (data collection/aggregation) and downstream (crop production) markets. Using a two-stage Muth model, this study assesses benefit distribution from ATPs' data-driven services in smart farming. Results show limited farmer returns from data sharing, questioning policymakers' data value focus. While data-driven services offer notable benefits, ATPs capture a significant share due to market power. Addressing ATP market power promotes equitable rent distribution, but perfect competition risks ATPs' sustainability and R&D incentives, presenting a policy challenge for smart farming outcomes.