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R&D Concentration in Soybean and Cotton Markets

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  • Anderson, Benjamin C.
  • Sheldon, Ian M.

Abstract

Using data on field trial applications, we estimate the lower bounds to concentration in research and development (R&D) activity for genetically modified (GM) cotton and soybean seed markets in the U.S. We find that both crop types exhibit endogenous costs of entry, which implies that firms respond to increases in market size with escalations of R&D investment, so as to improve product quality rather than permit additional firm entry. The implications of these results are that as markets for GM crop varieties become large, market concentration ratios will remain bounded away from perfectly competitive levels. In subsequent analyses, we adjust the measures of R&D concentration according to merger and acquisition (M&A) activity. We find that accounting for M&A activity increases the fitted lower bound to R&D concentration in both GM cotton and soybean seed markets by increasing the observed levels of concentration in small- and medium-sized submarkets for both crops.
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Suggested Citation

  • Anderson, Benjamin C. & Sheldon, Ian M., 2018. "R&D Concentration in Soybean and Cotton Markets," 2018 Annual Meeting, August 5-7, Washington, D.C. 274207, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea18:274207
    DOI: 10.22004/ag.econ.274207
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    More about this item

    Keywords

    Industrial Org./Supply Chain Management; Agribusiness Economics and Management; Production Economics;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

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