Regulatory Actions Under Adjustment Costs and the Resolution of Scientific Uncertainty
AbstractFood system regulators often decide whether to ban existing practices or approve new technologies without conclusive scientific evidence on possible damage and knowing that resolution is likely in the future. In a model with three decision points and stochastic resolution of uncertainty, we study interactions between expected losses due to regulation and information availability when a regulator is deciding on an early reversible ban and on a later reversible ban. Adjustment costs create inertia concerning intermediate signals such that earlier decisions are not overturned, and also a bias against imposing an early ban. The prospect of more later-stage information can increase or decrease the incentive to ban early, but research decreases the incentive to ban early.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12719.
Date of creation: 01 May 2006
Date of revision:
Publication status: Published in American Journal of Agricultural Economics, May 2006, vol. 88 no. 2, pp. 308-323
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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:
- David A. Hennessy & GianCarlo Moschini, 2006. "Regulatory Actions under Adjustment Costs and the Resolution of Scientific Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 308-323.
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- Zhao, Li & Gu, Haiying & Yue, Chengyan & Ahlstrom, David, 2013. "Consumer welfare and GM food labeling: A simulation using an adjusted Kumaraswamy distribution," Food Policy, Elsevier, vol. 42(C), pages 58-70.
- GianCarlo Moschini, 2008.
"Biotechnology and the Development of Food Markets: Retrospect and Prospects,"
Center for Agricultural and Rural Development (CARD) Publications
08-wp477, Center for Agricultural and Rural Development (CARD) at Iowa State University.
- GianCarlo Moschini, 2008. "Biotechnology and the development of food markets: retrospect and prospects," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 35(3), pages 331-355, September.
- Moschini, GianCarlo, 2008. "Biotechnology and the Development of Food Markets: Retrospect and Prospects," Staff General Research Papers 12982, Iowa State University, Department of Economics.
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