IDEAS home Printed from https://ideas.repec.org/p/ags/aaea09/49186.html
   My bibliography  Save this paper

On Pricing and Vertical Organization of Differentiated Products: The Case of Soybean Seed Industry

Author

Listed:
  • Shi, Guanming
  • Chavas, Jean-Paul

Abstract

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.

Suggested Citation

  • Shi, Guanming & Chavas, Jean-Paul, 2009. "On Pricing and Vertical Organization of Differentiated Products: The Case of Soybean Seed Industry," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49186, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea09:49186
    as

    Download full text from publisher

    File URL: http://purl.umn.edu/49186
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shi, Guanming & Stiegert, Kyle & Chavas, Jean Paul, 2010. "An Analysis of Pricing in Horizontal and Vertical Markets: The Case of the Cottonseed Market," Working Papers 201439, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.

    More about this item

    Keywords

    Vertical structures; pricing; imperfect competition; seed; biotechnology; Demand and Price Analysis; Industrial Organization; L13; L4; L65;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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). General contact details of provider: http://edirc.repec.org/data/aaeaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.