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Incentive to Reduce Crop Trait Durability

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  • Ambec, Stefan
  • Langinier, Corinne
  • Lemarie, Stephane

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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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12525.

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Date of creation: 14 Mar 2006
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Publication status: Published in American Journal of Agricultural Economics 2008, vol. 90 no. 2, pp. 379-391
Handle: RePEc:isu:genres:12525

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Web page: http://www.econ.iastate.edu
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  1. Alston, Julian M. & Venner, Raymond J., 2000. "The effects of the U.S. Plant Variety Protection Act on wheat genetic improvement:," EPTD discussion papers 62, International Food Policy Research Institute (IFPRI).
  2. Faruk Gul & Hugo Sonnenschein & Robert Wilson, 2010. "Foundations of Dynamic Monopoly and the Coase Conjecture," Levine's Working Paper Archive 232, David K. Levine.
  3. Perrin, Richard K. & Fulginiti, Lilyan E., 2002. "Dynamic Pricing Of Genetically Modified Crop Traits," 2002 Annual meeting, July 28-31, Long Beach, CA 19656, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
  5. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  6. 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.
  7. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
  8. Kesan, Jay P. & Gallo, Andres A., 2005. "Insecure Property Rights and Plant Varieties: Effects on the Market for Seeds in Argentina," 2005 Annual meeting, July 24-27, Providence, RI 19199, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Michael Waldman, 1996. "Planned Obsolescence and the R&D Decision," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 583-595, Autumn.
  10. Diana M. Burton & H. Alan Love & Gokhan Ozertan & Curtis R. Taylor, 2005. "Property Rights Protection of Biotechnology Innovations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(4), pages 779-812, December.
  11. Bulow, Jeremy, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 729-49, November.
  12. 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.
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Cited by:
  1. Khachaturyan, Marianna & Yiannaka, Amalia, 2012. "The Market Acceptance And Welfare Impacts Of Genetic Use Restriction Technologies (Gurts)," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126880, International Association of Agricultural Economists.
  2. Marc Baudry & Adrien Hervouet, 2014. "Innovation on the seed market: the role of IPRs and commercialisation rules," Working Papers 1411, Chaire Economie du Climat.
  3. Khachaturyan, Marianna & Yiannaka, Amalia, 2006. "The Market Acceptance and Welfare Impacts of Genetic Use Restriction Technologies (GURTs)," 2006 Annual meeting, July 23-26, Long Beach, CA 21329, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Marc Baudry & Adrien Hervouet, 2014. "Promoting innovation on the seed market and biodiversity: the role of IPRs and commercialisation rules," EconomiX Working Papers 2014-32, University of Paris West - Nanterre la Défense, EconomiX.

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