The pricing of innovations: an appplication to specialized corn traits
2002
Alexander, C. | Goodhue, R.E.
One concern regarding the growing agricultural biotechnology industry is the potential for these firms to exercise market power when pricing their innovations, which would affect the magnitude and distribution of resulting welfare gains. We argue that competition across production systems limits the exercise of such market power by suppliers. In order to examine the demand for these innovations, we evaluate the producer's returns to planting patented seed innovations, using a calibrated optimization model of a south-central Iowa corn producer's adoption decision. Overall, our results suggest that patented seed innovations do not increase the market power of biotechnology firms in the relevant market for production systems.
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