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Is Monsanto Leaving Money on the Table? Monopoly Pricing and Bt Cotton Value with Heterogeneous Adopters

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  • Oehmke, James F.
  • Wolf, Christopher A.

Abstract

We examine the allocation of technology rents between a price-setting, innovating monopolist and heterogeneous technology adopters. A model of monopoly pricing in the presence of heterogeneous adopters is used to examine conditions under which greater producer (farmer) heterogeneity leads to greater producer benefit from innovation in non-competitive markets. An application to Bt cotton determines the profit-maximizing price of Bt cotton seed and reveals that Monsanto and Delta and Pine Land are indeed leaving money on the table in the form of unexploited profit opportunities. However, we estimate that the presence of heterogeneous adopters explains over 80% of the rents that accrue to the farmers.

Suggested Citation

  • Oehmke, James F. & Wolf, Christopher A., 2004. "Is Monsanto Leaving Money on the Table? Monopoly Pricing and Bt Cotton Value with Heterogeneous Adopters," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(3), pages 1-14, December.
    • Handle: RePEc:ags:joaaec:43469
    DOI: 10.22004/ag.econ.43469
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    9. Bryan J. Hubbell & Michele C. Marra & Gerald A. Carlson, 2000. "Estimating the Demand for a New Technology: Bt Cotton and Insecticide Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(1), pages 118-132.
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    Cited by:

    1. Demont, Matty & Dillen, Koen & Daems, Wim & Sausse, Christophe & Tollens, Eric & Mathijs, Erik, 2009. "On the proportionality of EU spatial ex ante coexistence regulations," Food Policy, Elsevier, vol. 34(6), pages 508-518, December.
    2. Jeffrey Vitale & Marc Ouattarra & Gaspard Vognan, 2011. "Enhancing Sustainability of Cotton Production Systems in West Africa: A Summary of Empirical Evidence from Burkina Faso," Sustainability, MDPI, vol. 3(8), pages 1-34, July.
    3. Tiffany Shih & Brian Wright, 2011. "Agricultural Innovation," NBER Chapters, in: Accelerating Energy Innovation: Insights from Multiple Sectors, pages 49-85, National Bureau of Economic Research, Inc.
    4. Oehmke James F & Wolf Christopher A & Raper Kellie Curry, 2005. "On Cyclical Industry Evolution in Agricultural Biotechnology R&D," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 3(2), pages 1-27, March.

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    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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