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Product concentration and usage: Behavioral effects in the glyphosate market

Author

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  • Perry, Edward D.
  • Hennessy, David A.
  • Moschini, GianCarlo

Abstract

People often ignore or misunderstand information that would help them make better decisions. For products that differ by concentration level, a critical choice concerns the correct dosage rate. We study the effects of changing glyphosate product concentration levels on farmers’ glyphosate usage behavior. Glyphosate is the world's most widely used herbicide. After glyphosate went off patent in 2000, product variants with higher concentration levels entered the market. Using detailed farm-level glyphosate use data in U.S. corn and soybeans over the period 1998–2011, we estimate the impact of product concentration levels on glyphosate application rates. We control for prices and other sources of heterogeneity by means of individual and time fixed effects. Our findings indicate that increasing the baseline concentration level by 10% increases the application rate by nearly 6%, despite the fact that labels on more concentrated products provide instructions on how to correctly adjust dosage rates downwards. We attribute part of the concentration effect to rational behavior and part of it to label confusion and/or habit, with smaller farms and late adopters being more likely to resort to habit. A counterfactual simulation predicts that label confusion and/or habit was responsible for a 4.6% increase in total glyphosate use and an additional $59 million per year (4.7%) in glyphosate sellers’ revenues.

Suggested Citation

  • Perry, Edward D. & Hennessy, David A. & Moschini, GianCarlo, 2019. "Product concentration and usage: Behavioral effects in the glyphosate market," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 543-559.
  • Handle: RePEc:eee:jeborg:v:158:y:2019:i:c:p:543-559
    DOI: 10.1016/j.jebo.2018.12.027
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    References listed on IDEAS

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    2. John Y. Campbell, 2016. "Restoring Rational Choice: The Challenge of Consumer Financial Regulation," American Economic Review, American Economic Association, vol. 106(5), pages 1-30, May.
    3. Edward D. Perry & GianCarlo Moschini & David A. Hennessy, 2016. "Testing for Complementarity: Glyphosate Tolerant Soybeans and Conservation Tillage," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(3), pages 765-784.
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    More about this item

    Keywords

    Behavioral effects; Glyphosate; Heuristics; Label complexity; Product formulation;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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