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Multimarket Exploitation: The Case of Biotechnology and Chemicals

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  • Richard E. Just
  • Darrell L. Hueth

Abstract

Biotechnology enables rapid development of products with specific characteristics. We show that those who control the direction of biotechnology development influence the resulting industry structure. Through multimarket exploitation, chemical companies develop biotechnology that increases dependence on chemicals, whereas nonchemical companies tend toward development of biotechnology that substitutes for chemicals. Chemical companies tend to both underinvest and underproduce. Conversely, firms without vested chemical interests tend to overinvest and overproduce—even with monopoly-enabling patents. Results show how the consequent industry structure can be affected by choice of agricultural policy.

Suggested Citation

  • Richard E. Just & Darrell L. Hueth, 1993. "Multimarket Exploitation: The Case of Biotechnology and Chemicals," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(4), pages 936-945.
    • Handle: RePEc:oup:ajagec:v:75:y:1993:i:4:p:936-945.
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    File URL: http://hdl.handle.net/10.2307/1243981
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    Cited by:

    1. Corinne Alexander & Rachael E. Goodhue, 2002. "The pricing of innovations: An application to specialized corn traits," Agribusiness, John Wiley & Sons, Ltd., vol. 18(3), pages 333-348.
    2. Gray, Richard S. & Malla, Stavroula & Tran, Kien C., 2005. "Pecuniary, Non-Pecuniary, and Downstream Research Spillovers: The Case of Canola," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24776, European Association of Agricultural Economists.
    3. Jeremy Foltz & Bradford Barham & Kwansoo Kim, 2000. "Universities and agricultural biotechnology patent production," Agribusiness, John Wiley & Sons, Ltd., vol. 16(1), pages 82-95.
    4. Fulton, Murray E. & Keyowski, Lynette, 2000. "The Impact Of Technological Innovation On Producer Returns: The Case Of Genetically Modified Canola," Transitions in Agbiotech: Economics of Strategy and Policy, June 24-25, 1999, Washington, D.C. 25998, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
    5. Batie, Sandra S. & Ervin, David E., 2000. "Transgenic Crops And The Environment: Missing Markets And Public Role," Staff Paper Series 11556, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    6. Bryan Hubbell & Rick Welsh, 1998. "Transgenic crops: Engineering a more sustainable agriculture?," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 15(1), pages 43-56, March.
    7. Gardner, Justin G. & Nehring, Richard F. & Nelson, Carl H., 2008. "Genetically Modified Crops, an Input Distance Function Approach," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6800, Southern Agricultural Economics Association.
    8. Schimmelpfennig, David E. & Pray, Carl E. & Brennan, Margaret F., 2004. "The impact of seed industry concentration on innovation: a study of US biotech market leaders," Agricultural Economics, Blackwell, vol. 30(2), pages 157-167, March.
    9. Alexander, Corinne E. & Goodhue, Rachael E., 1999. "Production Systems Competition And The Pricing Of Innovations: An Application To Biotechnology And Seed Corn," 1999 Annual meeting, August 8-11, Nashville, TN 21646, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Demont, Matty & Tollens, Eric, 1999. "The Economics Of Agricultural Biotechnology: Historical And Analytical Framework," Working Papers 31845, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
    11. Gray, Richard & Malla, Stavroula, 2007. "Research Spillovers What They Are and Why They Matter for Policy," CAIRN Policy Briefs 273075, Canadian Agricultural Innovation and Regulation Network (CAIRN).
    12. Giannakas, Konstantinos, 2001. "The economics of intellectual property rights under imperfect enforcement: developing countries, biotechnology, and the TRIPs agreement," EPTD discussion papers 80, International Food Policy Research Institute (IFPRI).
    13. Zilberman, David & Yarkin, Cherisa & Heiman, Amir, 1997. "Agricultural Biotechnology: Economic and International Implications," 1997 Conference, August 10-16, 1997, Sacramento, California 197037, International Association of Agricultural Economists.
    14. Johan F.M.Swinnen & Thijs Vandemoortele, 2011. "On Butterflies and Frankenstein: A Dynamic Theory of Regulation," LICOS Discussion Papers 27611, LICOS - Centre for Institutions and Economic Performance, KU Leuven.

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