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Valuing Genetically Modified Traits in Canola Using Real Options

Author

Listed:
  • Wynn, Katherine
  • Spangenberg, German
  • Smith, Kevin
  • Wilson, William

Abstract

This study specifies a framework to evaluate an investment strategy combining a market assessment with a valuation method using a stochastic binomial real option model. The market assessment uses multi-criteria analysis to determine which markets should be targeted for commercialization of a genetically modified trait in a target crop. The stochastic binomial real option model is developed to determine whether commercialization is financially viable. The framework was applied to canola being developed using gene technology to increase its drought tolerance. Our results showed that drought-tolerant canola would be more profitable than conventional varieties, but it would only be sufficiently profitable to pursue commercialization in targeted regions or countries.

Suggested Citation

  • Wynn, Katherine & Spangenberg, German & Smith, Kevin & Wilson, William, 2017. "Valuing Genetically Modified Traits in Canola Using Real Options," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 42(2), May.
    • Handle: RePEc:ags:jlaare:257998
    DOI: 10.22004/ag.econ.257998
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    References listed on IDEAS

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    Cited by:

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    4. Hennessy, David A., 2018. "Managing Derived Demand For Antibiotics In Animal Agriculture," 2018 Annual Meeting, August 5-7, Washington, D.C. 274359, Agricultural and Applied Economics Association.

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