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Incentive to Reduce Crop Trait Durability

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Author Info
Ambec, Stefan
Langinier, Corinne
Lemarie, Stephane

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Abstract

To 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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File URL: http://www.econ.iastate.edu/research/webpapers/paper_12525_06007.pdf
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Publisher Info
Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12525.

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Length: 36 pages
Date of creation: 14 Mar 2006
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Publication status: Forthcoming in American Journal of Agricultural Economics
Handle: RePEc:isu:genres:12525

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
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Related research
Keywords: Durable good nondurable good licenses.

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Find related papers by JEL classification:
Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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References listed on IDEAS
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  1. Sergio H. Lence & Dermot J. Hayes & Alan McCunn & Stephen Smith & William S. Niebur, 2005. "Welfare Impacts of Intellectual Property Protection in the Seed Industry," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 87(4), pages 951-968, November. [Downloadable!] (restricted)
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  2. Richard K. Perrin & Lilyan E. Fulginiti, 2005. "Dynamic pricing of Genetically Modified Crop Traits," Industrial Organization 0501005, EconWPA. [Downloadable!]
  3. Bulow, Jeremy, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 729-49, November. [Downloadable!] (restricted)
  4. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April. [Downloadable!] (restricted)
  5. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law & Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  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. [Downloadable!] (restricted)
    Other versions:
  7. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June. [Downloadable!] (restricted)
  8. Michael Waldman, 1996. "Planned Obsolescence and the R&D Decision," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 583-595, Autumn. [Downloadable!] (restricted)
  9. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter. [Downloadable!] (restricted)
  10. Diana M. Burton & H. Alan Love & Gokhan Ozertan & Curtis R. Taylor, 2005. "Property Rights Protection of Biotechnology Innovations," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 14(4), pages 779-812, December. [Downloadable!] (restricted)
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