An Analysis of Bundle Pricing: The Case of the Corn Seed Market
AbstractThe paper investigates bundle pricing under imperfect competition. In a multiproduct context, the substitution/complementarity relationships among products can affect pricing in complex ways. This is used to motivate multi-product generalizations of the Herfindahl-Hirschmann index, which capture cross-market effects of imperfect competition on bundle pricing. Applied to the US corn seed market, the analysis investigates the pricing of conventional seeds and patented biotech seeds. For bundled biotech seeds, it finds strong evidence of sub-additive bundle pricing, thus rejecting standard component pricing. The econometric results document how increases in traditional and cross-market measures of imperfect competition contribute to higher seed prices.
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Bibliographic InfoPaper provided by University of Wisconsin, Agricultural and Applied Economics in its series Staff Paper Series with number 529.
Date of creation: Sep 2008
Date of revision:
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- Fernandez-Cornejo, Jorge & Livingston, Michael & Mitchell, Lorraine & Wechsler, Seth, 2014. "Genetically Engineered Crops in the United States," Economic Research Report 164263, United States Department of Agriculture, Economic Research Service.
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