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Product Concentration and Usage: Behavioral Effects in the Glyphosate Market

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Abstract

People often ignore or misunderstand information that would help them make better decisions. For products that differ by concentration level, a critical choice concerns the correct dosage rate. We study the effects of changing glyphosate product concentration levels on farmers' glyphosate usage behavior. Glyphosate is the world's most widely used herbicide. After glyphosate went off patent in 2000, product variants with higher concentration levels entered the market. Using detailed farm-level glyphosate use data in U.S. corn and soybeans over the period 1998-2011, we estimate the impact of product concentration levels on glyphosate application rates. We control for prices and other sources of heterogeneity by means of individual and time fixed effects. Our findings indicate that increasing the baseline concentration level by 10 percent increases the application rate by nearly 6 percent, despite the fact that labels on more concentrated products provide instructions on how to correctly adjust dosage rates downwards. We attribute part of the concentration effect to rational behavior and part of it to label confusion and/or habit, with smaller farms and late adopters being more likely to resort to habit. A counterfactual simulation predicts that label confusion and/or habit was responsible for a 4.6% increase in total glyphosate use and an additional $59 million per year (4.7%) in glyphosate sellers' revenues.

Suggested Citation

  • Edward D. Perry & David A. Hennessy & GianCarlo Moschini, 2019. "Product Concentration and Usage: Behavioral Effects in the Glyphosate Market," Center for Agricultural and Rural Development (CARD) Publications 19-wp588, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:19-wp588
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    Cited by:

    1. Sheldon Krimsky, 2021. "Can Glyphosate-Based Herbicides Contribute to Sustainable Agriculture?," Sustainability, MDPI, vol. 13(4), pages 1-15, February.
    2. Niklas Möhring & Martina Bozzola & Stefan Hirsch & Robert Finger, 2020. "Are pesticides risk decreasing? The relevance of pesticide indicator choice in empirical analysis," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 429-444, May.
    3. Che, Yuyuan & Hennessy, David A. & Feng, Hongli, . "Seeding Rate Responses to Markets, Resources, and Technologies," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 50(3).
    4. Luo, Jinjing & Moschini, GianCarlo & Perry, Edward D., 2023. "Switching costs in the US seed industry: Technology adoption and welfare impacts," International Journal of Industrial Organization, Elsevier, vol. 89(C).

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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