On Pricing and Vertical Organization of Differentiated Products: The Case of Soybean Seed Industry
This paper investigates the pricing and vertical organization of differentiated products under imperfect competition. In a multiproduct context, a Cournot model is used to examine how substitution/complementarity relationships among products and vertical structures can affect the exercise of market power. This motivates a generalization of the Herfindahl-Hirschman index (termed VHHI) capturing how market concentration and vertical structures interact to influence prices of differentiated products. The analysis is applied to pricing of soybean seeds in the US over the period 2000-2007. The analysis considers two vertical structures employed by biotech firms: vertical integration and licensing. The econometric analysis finds evidence that vertical organization has significant effects on seed prices. These effects are found to vary depending on the institutional setup and the bundling of genetic material. The empirical evidence shows that complementarity and economies of scope can reduce the effects of market concentration on prices.
|Date of creation:||Apr 2009|
|Contact details of provider:|| Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202|
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kleibergen, Frank & Paap, Richard, 2006.
"Generalized reduced rank tests using the singular value decomposition,"
Journal of Econometrics,
Elsevier, vol. 133(1), pages 97-126, July.
- Frank Kleibergen & Richard Paap, 2003. "Generalized Reduced Rank Tests using the Singular Value Decomposition," Tinbergen Institute Discussion Papers 03-003/4, Tinbergen Institute.
- Richard Paap & Frank Kleibergen, 2004. "Generalized Reduced Rank Tests using the Singular Value Decomposition," Econometric Society 2004 Australasian Meetings 195, Econometric Society.
- Kleibergen, F.R. & Paap, R., 2003. "Generalized Reduced Rank Tests using the Singular Value Decomposition," Econometric Institute Research Papers EI 2003-01, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Hicks, J. R., 1975. "Value and Capital: An Inquiry into some Fundamental Principles of Economic Theory," OUP Catalogue, Oxford University Press, edition 2, number 9780198282693.
- Joshua S. Gans, 2007. "Concentration-Based Merger Tests and Vertical Market Structure," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 661-681.
- Guanming Shi, 2009. "Bundling and Licensing of Genes in Agricultural Biotechnology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 264-274.
- Francine Lafontaine & Margaret Slade, 2007.
"Vertical Integration and Firm Boundaries: The Evidence,"
Journal of Economic Literature,
American Economic Association, vol. 45(3), pages 629-685, September.
- Lafontaine, Francine & Slade, Margaret, 2007. "Vertical Integration and Firm Boundaries : The Evidence," The Warwick Economics Research Paper Series (TWERPS) 799, University of Warwick, Department of Economics.
- Catherine C. de Fontenay & Joshua S. Gans, 2005.
"Vertical Integration in the Presence of Upstream Competition,"
RAND Journal of Economics,
The RAND Corporation, vol. 36(3), pages 544-572, Autumn.
- Catherine C. de Fontenay & Joshua S. Gans, 2004. "Vertical Integration in the Presence of Upstream Competition," Department of Economics - Working Papers Series 904, The University of Melbourne.
- Joshua Gans & Catherine de Fontenay, 2004. "Vertical Integration in the Presence of Upstream Competition," Econometric Society 2004 North American Winter Meetings 7, Econometric Society.
- R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 371-383.
- Gregory D. Graff & Gordon C. Rausser & Arthur A. Small, 2003.
"Agricultural Biotechnology's Complementary Intellectual Assets,"
The Review of Economics and Statistics,
MIT Press, vol. 85(2), pages 349-363, May.
When requesting a correction, please mention this item's handle: RePEc:ags:aaea09:49186. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.