Gyanodaya

In the Indian fruit and vegetable market, growers send their produce from villages to the wholesale market in the city by road, directly to their preferred commission agents. Indraprastha Ice and Cold Storage: Value Added Strategy in an Emerging Market (Version date 2012) is a case study that describes how commission agents, known locally as Arti, auction produce to wholesalers, retailers, and other buyers who purchase produce from wholesale markets.

Artis conducts sales in two ways: closed auction and open auctions. The former is accomplished through handshakes under a handkerchief, with the commission agent taking the hand of the bidding wholesaler and signaling the price under a handkerchief to keep the transaction price confidential. Wholesalers use three units of price when bidding: Noteʹ (Rs. 100), Dhakeʹ (Rs. 10), and Dhari (Rs. 5). When a bidder grasps three fingers of the commission agent under the handkerchief and says 'note', then holds four fingers and says 'dhake', it indicates a bid of Rs. 340 (3x100 + 4x10) for a box / unit quantity of produce at auction. After soliciting bids from all participating wholesalers, the commission agent closes the sale at the highest bid price. In an open auction, the commission agent solicits bids and sells the produce to the wholesaler with the highest bidding price called aloud

Commission agents prefer a closed auction and give two reasons for this. First, he wants to be able to sell the produce to a wholesaler who pays on the spot, even if his bid is slightly lower than the highest bidder, who may be perceived as having a high risk of default. Second, some wholesalers sell to retailers who have stores in upscale neighbourhoods where higher-income customers shop. These wholesalers can usually sell the fruit for a higher price. As a result, such wholesalers are willing to pay higher prices than middle-class retailers. Closed auctions allow commission agents to price appropriately when selling to wholesalers who cater to high-income areas versus those who sell in middle-class neighborhoods. Closed auctions ensure a level playing field in bidding, allowing retailers to purchase in lower-income areas. Wholesalers buy the produce, which is then sold to sub-wholesalers or retailers, who may keep it in cold storage to get a better price from their customers during the off-season. For decades, many Indian wholesale markets have used an instant closed auction process.