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An Analysis of Bundle Pricing: The Case of the Corn Seed Market

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  • Shi, Guanming
  • Chavas, Jean-Paul
  • Stiegert, Kyle

Abstract

This paper investigates bundle pricing under imperfect competition. In a multiproduct context, we first examine how substitution/complementarity relationships among products can affect pricing. This is used to motivate multi-product generalizations of the Herfindahl-Hirschmann index (GHHI) capturing cross-market effects of imperfect competition on bundle pricing. The GHHI model is applied to pricing of conventional and patented biotech seeds in the US from 2000-2007. One major finding is that standard component pricing in biotech traits is soundly rejected in favor of sub-additive bundle pricing. This result is consistent with the presence of scope economies in the production of genetic traits. The econometric estimates show how changes in market structures (as measured by both own- and cross-Herfindal indexes) affect U.S. corn seed prices.

Suggested Citation

  • Shi, Guanming & Chavas, Jean-Paul & Stiegert, Kyle, 2008. "An Analysis of Bundle Pricing: The Case of the Corn Seed Market," Working Papers 201445, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    • Handle: RePEc:ags:uwfswp:201445
    DOI: 10.22004/ag.econ.201445
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    Cited by:

    1. Shi, Guanming & Stiegert, Kyle W. & Chavas, Jean-Paul, 2009. "An Analysis of Pricing in the U.S. Cotton Seed Market," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 51617, Agricultural and Applied Economics Association.
    2. Yoo, Do-il, 2012. "Individual and Social Learning in Bio-technology Adoption: The Case of GM Corn in the U.S," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124975, Agricultural and Applied Economics Association.
    3. Mélanie Jaeck & Robert Lifran & Hubert Stahn, 2012. "Emergence of Organic Farming under Imperfect Competition: Economic Conditions and Incentives," Working Papers hal-02805961, HAL.
    4. Mélanie Jaeck & Robert Lifran & Hubert Stahn, 2012. "Emergence of Organic Farming under Imperfect Competition," AMSE Working Papers 1239, Aix-Marseille School of Economics, France.
    5. Nolan, Elizabeth & Santos, Paulo, 2009. "Evidence for increasing concentration in plant breeding industries in the United States and the European Union," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 48060, Australian Agricultural and Resource Economics Society.
    6. Fernandez-Cornejo, Jorge & Livingston, Michael J. & Mitchell, Lorraine & Wechsler, Seth, 2014. "Genetically Engineered Crops in the United States," Economic Research Report 164263, United States Department of Agriculture, Economic Research Service.

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