Incentive to Reduce Crop Trait Durability
AbstractTo reduce the competition from farmers who self-produce seed, an inbred line seed producer can switch to nondurable hybrid seed. In a two-period model we investigate the impact of crop durability on self-production, pricing and switching decisions, and we examine the impact of license fees paid by self-producing farmers. First, in an inbred line seed monopoly model, we find that the monopolist may produce technologically dominated hybrid seed in order to extract more surplus from farmers. Further, the introduction of license fees improves efficiency. Second, we study how the monopolist's behavior is affected by the entry of a nondurable hybrid seed producer. We show that the inbred line seed producer might benefit from competing with a technologically dominated hybrid seed producer, as this allows for consumers' discrimination.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12525.
Date of creation: 14 Mar 2006
Date of revision:
Publication status: Published in American Journal of Agricultural Economics 2008, vol. 90 no. 2, pp. 379-391
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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Other versions of this item:
- NEP-AGR-2006-03-24 (Agricultural Economics)
- NEP-ALL-2006-03-19 (All new papers)
- NEP-COM-2006-03-20 (Industrial Competition)
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