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Incentive to reduce crop trait durability

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Author Info

  • Ambec, Stefan
  • Langinier, Corinne
  • Lemarie, Stephane

Abstract

Inbred line seed producers face competition from their own consumers: farmers who save part of their harvest can costly self-produce. To reduce this competition, seed producers can switch to non-durable hybrid seed production. In a two-period model, we investigate what is the impact of crop durability on self-production, pricing strategies and switching decision. We first study the pricing decisions and switching decisions of an inbred line seed monopoly. Then, we analyze how the monopoly's behavior is affected by the entry of a hybrid seed producer. We also examine how the introduction of royalties on farmers who self-produce improves efficiency. Our main finding is that, for some constellation of costs, an inbred line seed monopoly has an incentive to produce technologically dominated hybrid seed in order to extract more surplus from farmers. Along the same lines, an inbred line monopoly has an incentive to let a hybrid seed producer enters the market for discrimination purposes.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2005 Annual meeting, July 24-27, Providence, RI with number 19251.

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Date of creation: 2005
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Handle: RePEc:ags:aaea05:19251

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Keywords: Crop Production/Industries;

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References

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  1. Alan McCunn & Stephen Smith & William S. Niebur, 2005. "Welfare Impacts of Intellectual Property Protection in the Seed Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 951-968.
  2. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
  3. Perrin, Richard K. & Fulginiti, Lilyan E., 2002. "Dynamic Pricing Of Genetically Modified Crop Traits," 2002 Annual meeting, July 28-31, Long Beach, CA 19656, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  5. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
  6. Diana M. Burton & H. Alan Love & Gokhan Ozertan & Curtis R. Taylor, 2005. "Property Rights Protection of Biotechnology Innovations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(4), pages 779-812, December.
  7. Alston, Julian M. & Venner, Raymond J., 2002. "The effects of the US Plant Variety Protection Act on wheat genetic improvement," Research Policy, Elsevier, vol. 31(4), pages 527-542, May.
  8. Lence, Sergio H. & Hayes, Dermot J. & McCunn, Alan & Smith, Stephen & Niebur, William S., 2005. "Welfare Impacts of Intellectual Property Protection in the Seed Industry," Staff General Research Papers 12434, Iowa State University, Department of Economics.
  9. Michael Waldman, 1996. "Planned Obsolescence and the R&D Decision," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 583-595, Autumn.
  10. Kesan, Jay P. & Gallo, Andres A., 2005. "Insecure Property Rights and Plant Varieties: Effects on the Market for Seeds in Argentina," 2005 Annual meeting, July 24-27, Providence, RI 19199, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  11. Bulow, Jeremy, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 729-49, November.
  12. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
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Cited by:
  1. Khachaturyan, Marianna & Yiannaka, Amalia, 2006. "The Market Acceptance and Welfare Impacts of Genetic Use Restriction Technologies (GURTs)," 2006 Annual meeting, July 23-26, Long Beach, CA 21329, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Marc Baudry & Adrien Hervouet, 2014. "Innovation on the seed market: the role of IPRs and commercialisation rules," Working Papers 1411, Chaire Economie du Climat.
  3. Khachaturyan, Marianna & Yiannaka, Amalia, 2012. "The Market Acceptance And Welfare Impacts Of Genetic Use Restriction Technologies (Gurts)," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126880, International Association of Agricultural Economists.
  4. Marc Baudry & Adrien Hervouet, 2014. "Promoting innovation on the seed market and biodiversity: the role of IPRs and commercialisation rules," EconomiX Working Papers 2014-32, University of Paris West - Nanterre la Défense, EconomiX.

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