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Emergence of Organic Farming under Imperfect Competition

Author

Listed:
  • Mélanie Jaeck

    (Montpellier Business School (CEROM))

  • Robert Lifran

    () (Montpellier Business School (CEROM))

  • Hubert Stahn

    () (Aix Marseille University (Aix Marseille School of Economics), CNRS & EHESS)

Abstract

This article explores the economic conditions for the viability of organic farming in a context of imperfect competition. While most research dealing with this issue has adopted an empirical approach, we propose a theoretical foundation. Farmers have a choice between two technologies, the conventional one using two complementary inputs, chemicals and seeds, and the organic one only requiring organic seeds. The upstream markets are oligopolistic and the firms adopt Cournot behavior. The game is solved backward. The equilibrium repartition of the farmers between both sectors is obtained by a free entry condition. Since multiple equilibria could exist, including the non emergence of organic farming, we spell out viability conditions for organic farming. Then, using an "infant industry" argument, we propose several public policy instruments able to support the development of organic farming, and assess their relative efficiency. Results could be useful to assess the conditions of emergence and viability of agricultural innovations in analogous contexts.

Suggested Citation

  • Mélanie Jaeck & Robert Lifran & Hubert Stahn, 2012. "Emergence of Organic Farming under Imperfect Competition," AMSE Working Papers 1239, Aix-Marseille School of Economics, Marseille, France.
  • Handle: RePEc:aim:wpaimx:1239
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    File URL: http://www.amse-aixmarseille.fr/sites/default/files/_dt/2012/wp_2012_-_nr_39.pdf
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    References listed on IDEAS

    as
    1. S. McCorriston & C. W. Morgan & A. J. Rayner, 1998. "Processing Technology, Market Power and Price Transmission," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(2), pages 185-201.
    2. Mélanie Jaeck & Robert Lifran, 2009. "Preferences, Norms and Constraints in farmers' agro-ecological choices. Case study using choice experiments survey in the Rhone River Delta, France," Working Papers 09-16, LAMETA, Universtiy of Montpellier, revised Dec 2009.
    3. Alfons Oude Lansink & Ky–sti Pietola, 2002. "Effciency and productivity of conventional and organic farms in Finland 1994--1997," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, pages 51-66.
    4. Timothy A. Park & Luanne Lohr, 1996. "Supply and Demand Factors for Organic Produce," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 647-655.
    5. Elodie Rouviere & Raphael Soubeyran, 2011. "Competition vs. quality in an industry with imperfect traceability," Economics Bulletin, AccessEcon, vol. 31(4), pages 3052-3067.
    6. Hayenga, Marvin L., 1998. "Structural Change in the Biotech Seed and Chemical Industrial Complex," Staff General Research Papers Archive 5000, Iowa State University, Department of Economics.
    7. Batte, Marvin T. & Hooker, Neal H. & Haab, Timothy C. & Beaverson, Jeremy, 2007. "Putting their money where their mouths are: Consumer willingness to pay for multi-ingredient, processed organic food products," Food Policy, Elsevier, pages 145-159.
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    More about this item

    Keywords

    agricultural inputs; organic farming; imperfect competition; technological choice; free entry; policy design.;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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