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Optimal supplier testing and tolerance strategies for genetically modified (GM) wheat

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  • William W. Wilson
  • Bruce L. Dahl
  • Eric Jabs

Abstract

A stochastic optimization model was developed to determine optimal testing strategies, costs, and risks for dual marketing of genetically modified (GM) and non‐GM wheat in an export supply chain. The optimal testing strategy is derived that minimizes disutility of additional system costs due to testing and quality loss. Cost components were estimated including those related to testing, quality loss, and a risk premium to induce shippers to undertake dual marketing as opposed to handling only non‐GM crops. Uncertainties were incorporated for adventitious presence and commingling, variety declaration, and test accuracy. Sensitivities were performed for effects of variety risks and declaration, penalty differentials, buyer tolerances, risk aversion, and GM adoption. Results indicate testing and segregation can be performed at a relatively low cost and risk to buyers.

Suggested Citation

  • William W. Wilson & Bruce L. Dahl & Eric Jabs, 2007. "Optimal supplier testing and tolerance strategies for genetically modified (GM) wheat," Agricultural Economics, International Association of Agricultural Economists, vol. 36(1), pages 39-48, January.
    • Handle: RePEc:bla:agecon:v:36:y:2007:i:1:p:39-48
    DOI: 10.1111/j.1574-0862.2007.00175.x
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    1. MacDonald, James M. & Perry, Janet E. & Ahearn, Mary Clare & Banker, David E. & Chambers, William & Dimitri, Carolyn & Key, Nigel D. & Nelson, Kenneth E. & Southard, Leland W., 2004. "Contracts, Markets, and Prices: Organizing the Production and Use of Agricultural Commodities," Agricultural Economic Reports 34013, United States Department of Agriculture, Economic Research Service.
    2. Golan, Elise H. & Krissoff, Barry & Kuchler, Fred & Calvin, Linda & Nelson, Kenneth E. & Price, Gregory K., 2004. "Traceability In The U.S. Food Supply: Economic Theory And Industry Studies," Agricultural Economic Reports 33939, United States Department of Agriculture, Economic Research Service.
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