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Monopolistic pricing power for transgenic crops when technology adopters face irreversible benefits and costs

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Author Info
Robert D. Weaver
Justus Wessler

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Abstract

Pricing of biotechnology innovation under a patent grant is reconsidered in a model with uncertain returns and irreversible costs and benefits. Past results on restricted monopoly pricing in the presence of competing technologies showed that pricing power is reduced. The timing of adoption of an innovation is delayed and the pricing power of the restricted monopolist is further reduced when uncertainty and irreversibility is considered. The presence of irreversible benefits results in increased willingness-to-pay for the innovation, accelerating adoption, and increasing the innovator's restricted monopolist pricing power. Using Monte-Carlo simulation, the quantitative effects were approximated by a linear function through the hyper-plane.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Economics Letters.

Volume (Year): 11 (2004)
Issue (Month): 15 (December)
Pages: 969-973
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Handle: RePEc:taf:apeclt:v:11:y:2004:i:15:p:969-973

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  1. Falck-Zepeda, Jose Benjamin & Traxler, Greg & Nelson, Robert G, 2000. " Surplus Distribution from the Introduction of a Biotechnology Innovation," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 82(2), pages 360-69, May. [Downloadable!] (restricted)
  2. Eric Tollens, 2004. "Biodiversity versus transgenic sugar beet: the one euro question," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 31(1), pages 1-18, March.
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  1. Volker Beckmann & Claudio Soregaroli & Justus Wesseler, 2006. "Governing the Co-Existence of GM Crops - Ex-Ante Regulation and Ex-Post Liability under Uncertainty and Irreversibility," ICAR Discussion Papers (Institutional Change in Agriculture and Natural Resources) 1206, Division of Resource Economics, Department of Agricultural Economics and Social Sciences, Humboldt University Berlin. [Downloadable!]
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  2. Dillen, K & Demont, M. & Tollens, E., 2008. "Modelling heterogeneity to estimate the ex ante value of biotechnology innovations," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43945, European Association of Agricultural Economists. [Downloadable!]
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