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Product Conflation and Deconflation: An Anatomy of a Marketplace Reform


A large portion of the GDP of low-income countries moves through centralized commodity exchanges, which makes even “small” market design issues for those exchanges “large” issues for economic growth. A decision that arguably precedes other market design considerations for an exchange is “what is the product?” Which commodities should be conflated into a single product, and which should be left separate? We study a dramatic reform changing the product definition boundaries in a large commodity exchange. After arriving at the exchange, coffee is given a fine-grained numerical quality score. Before the reform, all coffees in a coarse quality bin, called a “grade”, would be sold in a single anonymized auction mechanism (a limit order book). After the reform, each seller’s lot was sold in a separate auction that advertised that lot’s fine-grained numerical quality score and the seller’s identifying information. The reform thus “deconflated” products that were conflated before the reform. We show that the additional information made available by deconflation is by and large ignored by the market, except for grades at the extremes of the quality distribution. The reform has subtle distributional impacts. Sellers of naturally processed coffee, who are smaller in scale and have less capital, benefit, while sellers of mechanically or wet-processed coffee, who tend to be larger and more capital-rich, are harmed.


Working Paper


Isaias N. Chaves, Ameet Morjaria

Date Published



Chaves, Isaias N., and Ameet Morjaria. 2023. Product Conflation and Deconflation: An Anatomy of a Marketplace Reform.


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