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Promoting innovation on the seed market and biodiversity: the role of IPRs and commercialisation rules

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  • Marc Baudry
  • Adrien Hervouet

Abstract

This article deals with the impact of legislation in the seed sector on incentives for variety creation. Two categories of rules interact. The first category consists in intellectual property rights and is intended to address a problem of sequential innovation and R&D investments by the private sector. The second category concerns commercial rules that are intended to correct a problem of adverse selection on the seed market. We propose a dynamic model of market equilibrium with vertical product differentiation that enables us to take into account the economic consequences of imposing either Plant Breeders’ Rights (PBRs) or patents as IPRs. We simultaneously examine two kinds of commercial legislation: compulsory registration in a catalogue and minimum standards for commercialisation. Analytical results are completed by numerical simulations. The main result is that the combination between minimum standards and PBRs provides higher incentives for sequential innovation and may be preferred by a public regulator to maximise the expected and discounted total surplus when sunk investment costs are low or when they are medium and the probability of R&D success is sufficiently high. This solution differs from the combination of IPRs and commercialisation rules used in both the US and Europe. Otherwise, PBRs have to be replaced by patents, which yields a configuration close to that observed in the US. The catalogue commercialisation rule is seldom preferred to minimum standards, so that the combination of IPRs and commercialisation rules that prevails in Europe is not supported by our model.

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File URL: http://economix.fr/pdf/dt/2014/WP_EcoX_2014-32.pdf
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Bibliographic Info

Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2014-32.

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Length: 38 pages
Date of creation: 2014
Date of revision:
Handle: RePEc:drm:wpaper:2014-32

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Related research

Keywords: Intellectual Property Rights; Plant Breeders’ Rights; Catalogue; Product differentiation; Asymmetric information; Biodiversity.;

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  1. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
  2. Ted O'Donoghue & Suzanne Scotchmer & Jacques-François Thisse, 1998. "Patent Breadth, Patent Life, and the Pace of Technological Progress," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 1-32, 03.
  3. 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.
  4. Ambec, Stefan & Langinier, Corinne & Lemarie, Stephane, 2005. "Incentive to reduce crop trait durability," 2005 Annual meeting, July 24-27, Providence, RI 19251, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. W. Lesser, 1997. "Assessing the Implications of Intellectual Property Rights on Plant and Animal Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(5), pages 1584-1591.
  6. 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.
  7. GianCarlo Moschini & Oleg Yerokhin, 2008. "Patents, Research Exemption, and the Incentive for Sequential Innovation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(2), pages 379-412, 06.
  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. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science.
  10. C. S. Srinivasan, 2003. "Exploring the Feasibility of Farmers' Rights," Development Policy Review, Overseas Development Institute, vol. 21, pages 419-447, 07.
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