Emergence of Organic Farming under Imperfect Competition
AbstractThis article explores the economic conditions for the viability of organic farming in a context of imperfect competition. While most research dealing with this issue has adopted an empirical approach, we propose a theoretical foundation. Farmers have a choice between two technologies, the conventional one using two complementary inputs, chemicals and seeds, and the organic one only requiring organic seeds. The upstream markets are oligopolistic and the firms adopt Cournot behavior. The game is solved backward. The equilibrium repartition of the farmers between both sectors is obtained by a free entry condition. Since multiple equilibria could exist, including the non emergence of organic farming, we spell out viability conditions for organic farming. Then, using an "infant industry" argument, we propose several public policy instruments able to support the development of organic farming, and assess their relative efficiency. Results could be useful to assess the conditions of emergence and viability of agricultural innovations in analogous contexts.
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Bibliographic InfoPaper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1239.
Length: 27 pages
Date of creation: Dec 2012
Date of revision:
agricultural inputs; organic farming; imperfect competition; technological choice; free entry; policy design.;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-01-07 (Agricultural Economics)
- NEP-ALL-2013-01-07 (All new papers)
- NEP-COM-2013-01-07 (Industrial Competition)
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