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An Analysis of the Pricing of Traits in the U.S. Corn Seed Market
University of Wisconsin-Madison
Department of Agricultural & Applied Economics
Staff Paper No. 544
December 2009
An Analysis of the Pricing of Traits in the U.S. Corn Seed Market
By Guanming Shi, Jean-Paul Chavas and Kyle Stiegert
AGRICULTURAL & APPLIED ECONOMICS
STAFF PAPER SERIES
Abstract
This paper investigates the pricing of patented traits in the U.S. hybrid corn seed market 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-Hirschman 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 subadditive bundle pricing. The econometric estimates show how changes in market structures (as measured by both own- and cross-Herfindahl indexes) affect U.S. corn seed prices.
Paper: http://www.aae.wisc.edu/pubs/sps/pdf/stpap544.pdf
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Website: http://www.wisc.edu Published: December 21, 2009 |
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