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Measuring Returns to an Innovation in an Imperfectly Competitive Market: Application to Mechanical Harvesting of Processing Tomatoes in Taiwan

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  • Shu-Yu Huang
  • Richard J. Sexton

Abstract

In this paper we develop and apply a general imperfect competition model to evaluate returns to a cost-reducing innovation. Most related work has applied models of perfect competition. Results demonstrate that welfare estimates derived from a model of perfect competition may be seriously distorted when the relevant market is imperfectly competitive. Application to mechanical harvesting of processing tomatoes in Taiwan reveals the potential for significant benefits to adoption of mechanical harvesting in Taiwan. However, farmers' incentives to adopt the harvester are attenuated because total benefits are reduced by oligopsony power in tomato procurement, and imperfectly competitive processors will capture a large share of the benefits that remain. Copyright 1996, Oxford University Press.

Suggested Citation

  • Shu-Yu Huang & Richard J. Sexton, 1996. "Measuring Returns to an Innovation in an Imperfectly Competitive Market: Application to Mechanical Harvesting of Processing Tomatoes in Taiwan," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 558-571.
  • Handle: RePEc:oup:ajagec:v:78:y:1996:i:3:p:558-571
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    1. Alston, Julian M. & Sexton, Richard J. & Zhang, Mingxia, 1999. "Imperfect competition, functional forms, and the size and distribution of research benefits," Agricultural Economics, Blackwell, vol. 21(2), pages 155-172, October.
    2. Saitone, Tina L. & Sexton, Richard J. & Sexton, Steven E., 2008. "Market Power in the Corn Sector: How Does It Affect the Impacts of the Ethanol Subsidy?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(2), August.
    3. Unterschultz, James R. & Jeffrey, Scott R. & Quagrainie, Kwamena K., 2000. "Value-Adding 20 Billion By 2005: Impact At The Alberta Farm Gate," Project Report Series 24049, University of Alberta, Department of Resource Economics and Environmental Sociology.
    4. Richards, Timothy J. & Padilla, Luis, 2001. "Commodity R&D, Patenting, And Promotion," 2001 Annual meeting, August 5-8, Chicago, IL 20497, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Kostandini, Genti & Mills, Bradford F. & Norton, George W., 2004. "Potential Impacts Of Pharmaceutical Uses Of Transgenic Tobacco: The Case Of Human Serum Albumin (Hsa)," 2004 Annual meeting, August 1-4, Denver, CO 20289, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Fulton, Murray E. & Keyowski, Lynette, 2000. "The Impact Of Technological Innovation On Producer Returns: The Case Of Genetically Modified Canola," Proceedings: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.
    7. James F. Oehmke & Dave D. Weatherspoon & Christopher A. Wolf & Anwar Naseem & Mywish Maredia & Amie Hightower, 2000. "Is agricultural research still a public good?," Agribusiness, John Wiley & Sons, Ltd., vol. 16(1), pages 68-81.
    8. Xia, Tian & Sancewich, Brian, 2012. "Retail Markets and Buyer Power in Agricultural Procurements," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124929, Agricultural and Applied Economics Association.
    9. David M. McEvoy & Sylvia Brandt & Sven Anders, 2009. "The Effects of ITQ Management on Fishermen’s Welfare When the Processing Sector Is Imperfectly Competitive," Land Economics, University of Wisconsin Press, vol. 85(3), pages 470-484.
    10. Alston, Julian M. & Pardey, Philip G., 2001. "Attribution and other problems in assessing the returns to agricultural R&D," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 25(2-3), September.
    11. Sexton, Richard J. & Sexton, Terri A., 2000. "Measuring research benefits in an imperfect market: reply to Holloway," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 22(2), March.
    12. Zhao, Xueyan & Mullen, John D. & Griffith, Garry R. & Griffiths, William E. & Piggott, Roley R., 2000. "An Equilibrium Displacement Model of the Australian Beef Industry," Research Reports 28007, New South Wales Department of Primary Industries Research Economists.
    13. Weatherspoon, Dave D. & Oehmke, James F. & Wolf, Christopher A. & Naseem, Anwar & Maredia, Mywish K. & Hightower, Amie L., 1999. "Global Implications From A North-North-South Trade Model: A Biotech Revolution," Staff Papers 11566, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    14. Sexton, Richard J. & Sexton, Terri A., 2000. "Measuring research benefits in an imperfect market: reply to Holloway," Agricultural Economics, Blackwell, vol. 22(2), pages 129-131, March.
    15. Sexton, Richard J. & Sheldon, Ian M. & McCorriston, Steve & Wang, Humei, 2004. "Analyzing Vertical Market Structure And Its Implications For Trade Liberalization," 2004 Annual meeting, August 1-4, Denver, CO 20060, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Quagrainie, Kwamena K. & Unterschultz, James R. & Jeffrey, Scott R., 2000. "The Impact Of Post-Farmgate Value-Adding On Western Canadian Agriculture," 2000 Annual Meeting, June 29-July 1, 2000, Vancouver, British Columbia 36379, Western Agricultural Economics Association.
    17. Sexton, Richard J. & Sheldon, Ian M. & McCorriston, Steve & Wang, Humei, 2003. "Analyzing Vertical Market Structure And Its Implications For Trade Liberalization And Market Access," Working Papers 14600, International Agricultural Trade Research Consortium.
    18. Mounter, Stuart W. & Griffith, Garry R. & Piggott, Roley R. & Fleming, Euan M. & Zhao, Xueyan, 2008. "An Equilibrium Displacement Model of the Australian Sheep and Wool Industries," Research Reports 37663, New South Wales Department of Primary Industries Research Economists.
    19. Merel, Pierre R., 2007. "Efficiency and Redistribution in the French Comte Cheese Market," 103rd Seminar, April 23-25, 2007, Barcelona, Spain 9396, European Association of Agricultural Economists.
    20. Byeong-Il Ahn & Hyunok Lee, 2010. "An equilibrium displacement approach to oligopoly market analysis: an application to trade in the Korean infant formula market," Agricultural Economics, International Association of Agricultural Economists, vol. 41(2), pages 101-109, March.
    21. Alston, Julian M. & Pardey, Philip G., 2000. "Reassessing Research Returns: Attribution and Related Problems," 2000 Conference, August 13-18, 2000, Berlin, Germany 197205, International Association of Agricultural Economists.
    22. Henderson, Benjamin B. & Henry, Lynn A. & MacAulay, T. Gordon, 2006. "Investment and Change in the Coconut Industry of North Sulawesi: An Equilibrium Displacement Analysis," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 139789, Australian Agricultural and Resource Economics Society.

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