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The Product Line Strategy of a Company Selling Seed with a Licensed GM Trait

Author

Listed:
  • Lemarié Stéphane
  • Baghdasaryan Delia
  • Campens Etienne

    (GAEL, INRA, University Grenoble Alpes, CNRS, Grenoble-INP, F-38000Grenoble, France)

Abstract

The economic impact of Genetically Modified Organisms (GMOs) depends heavily on the product line supplied by the seed companies. In this paper, we analyze the interlinking between seed product line and license contract signed between the seed company and the upstream agbiotech firm which owns the Genetically Modified (GM) trait. We show that if the farmers are sufficiently heterogeneous, the seed company prefers to price discriminate by supplying both GM and conventional seeds. In those circumstances, despite higher efficiency of the GM seed, the price increase is such that the farmer’s surplus decreases. This loss may even outweigh the aggregate gains of the seed and the agbiotech companies, thereby leading to a total welfare loss.

Suggested Citation

  • Lemarié Stéphane & Baghdasaryan Delia & Campens Etienne, 2017. "The Product Line Strategy of a Company Selling Seed with a Licensed GM Trait," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 15(1), pages 1-15, January.
    • Handle: RePEc:bpj:bjafio:v:15:y:2017:i:1:p:15:n:5
    DOI: 10.1515/jafio-2016-0030
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    References listed on IDEAS

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    4. Guanming Shi & Jean-paul Chavas & Kyle Stiegert, 2010. "An Analysis of the Pricing of Traits in the U.S. Corn Seed Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(5), pages 1324-1338.
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    More about this item

    Keywords

    price discrimination; licensing; GMOs;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

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